- BoC and Fed leave rates unchanged-as expected
- Oil prices surge on heightened US/Iran tensions
- US dollar on the defensive
USDCAD open: 1.3560, overnight range 1.3510-1.3572, close 1.3558, WTI 64.70, Gold 5484.71
The Canadian dollar is traders with a bullish bias as it follows the lead of the G-7 major currencies.
The Bank of Canada left interest rates unchanged, noting that elevated uncertainty makes it difficult to predict both the timing and direction of the next policy move.
The Canadian dollar is getting additional support by the surge in gold prices, which continue to attract haven demand. XAUUSD climbed to 5595.44 from 5417.32 as fears grew that President Trump may order military action against Iran.
Oil prices have added another layer of complexity. WTI crude rose from 63.29 to 65.08 amid mounting concern over potential US action against Iran, reinforced by Trump’s warning that time is running out.
The US dollar attempted a brief recovery yesterday after Treasury Secretary Scott Bessent reiterated that the Administration favours a strong dollar and dismissed speculation around yen intervention. Markets treated the move as little more than an opportunity to take profit, reflecting lingering distrust given the Administration’s inconsistent messaging, and the greenback softened again overnight.
The Federal Reserve left its policy rate unchanged at 3.50% to 3.75%, as expected. Chair Powell described growth as solid, noted tentative stabilisation in the labour market, and said inflation remains somewhat elevated, with tariff-related goods prices accounting for much of the overshoot. Governors Miran and Waller dissented, voting for a 50 bp cut.
Asian equity markets finished modestly higher, led by the Hang Seng, which gained 0.51%, followed by Japan’s Topix at 0.29%, while Australia’s ASX 200 ended flat.
As of 7:35 am, in Europe, the FTSE 100 is up 0.75%, the CAC-40 has added 0.53%, and the DAX is down 0.88%. S&P 500 futures have risen by 0.17%. The US Dollar Index is at 96.36, and the the 10-year Treasury yield sits at 4.249%.
EURUSD chopped around in 1.1938–1.1997 band consolidating recent gains while maintaining a constructive tone above 1.1900. Broad-based US dollar weakness and stronger-than-expected Eurozone business confidence, with the January reading at 99.4 versus 97.2 previously, have underpinned the single currency. Demand has also been supported by portfolio reallocation away from US assets as global investors seek alternatives.
GBPUSD traded within a 1.3781–1.3848 range and remains supported by ongoing US dollar softness and renewed concerns about a potential US government shutdown. Additional support has come from optimism that Prime Minister Starmer can make progress in resetting UK–China relations. Short-term technical signals remain positive while prices hold above 1.3750.
USDJPY rebounded in a 152.78–153.64 band hovering near the top of the band after US officials denied any effort to weaken the yen through intervention. The advance has lacked conviction, reflecting market skepticism toward official assurances.
AUDUSD rallied in a 0.7021–0.7095 range, rallying sharply before easing back to 0.7037 in New York. The move was driven by rising expectations of an RBA rate hike next week, firmer commodity prices, particularly gold, and persistent US dollar weakness.
Canadian and US trade data, along with US weekly jobless claims and factory orders are due.
