Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3430-1.3680
Euro 1.6110-1.6460
Sterling 1.8560-1.8810
WTI Oil (opening level) $62.70
The CAD/USD is opening at 1.3555 ( 0.7378 )
The Bank of Canada is expected to leave its benchmark rate unchanged at 2.25% at today’s meeting, extending the pause it signalled back in December.
At its last decision, the central bank made clear it sees policy as roughly where it needs to be to keep inflation close to the 2% target, so long as the economy behaves as expected. Still, officials were keen to underline that they’re not locked in and stand ready to respond if the outlook deteriorates or inflation risks re-emerge.
On inflation, the message remains cautiously reassuring. Headline CPI is projected to hover near the target as spare capacity in the economy helps offset cost pressures tied to trade reconfiguration. Even so, underlying inflation is still running a little hot, suggesting the disinflation process isn’t complete.
The growth picture is also uneven: Q4 GDP is expected to come in soft, with firmer domestic demand likely to be outweighed by a drag from net exports. That follows a surprisingly strong Q3, which the BoC has largely put down to trade-related volatility rather than a genuine pickup in momentum. The labour market offers a slightly brighter note, with early signs of improvement reinforcing the Bank’s wait-and-see approach.
Inflation, however, remains the key watchpoint after the headline CPI edged up to 2.4% YoY in December, while core inflation eased to 2.8% YoY. The bank’s preferred measures, CPI-Common, Trimmed and Median, also ticked lower, but at 2.8%, 2.7% and 2.5% respectively, they remain comfortably above target.
Headlines
· The Fed is likely to announce no change to the rate target range of 3.50-3.75% at Wednesday’s FOMC, amidst speculation of Trump naming a dovish Fed chair. The dollar is under pressure from potential shutdown fears due to Homeland Security funding disputes and a broader "sell America" trade amid possible US-Japan currency intervention.
· President Trump was out with a number of statements late Tuesday suggesting the administration is happy to see the greenback weaker. Trump indicated that he thought the recent US dollar decline was “great”, but that “I could have it go up or go down like a yo yo”. He also complained about China and Japan’s currency, saying the two countries “always want to devalue”.
· Australia Dec. CPI out at 3.8% YoY vs. 3.6% expected and 3.4% in Nov., while the Trimmed Mean CPI measure decelerated to 0.2% MoM vs. 0.3% in November and the YoY measure came in at 3.3% as expected and vs. 3.2% in Nov. The overall Q4 Trimmed Mean CPI measure came in 0.9% QoQ and 3.4% YoY vs. 0.9%/3.3% expected.
· The Case-Shiller Index rose 1.4% year-over-year in November 2025, slightly above October’s 1.3%, marking the first rise in ten months but near a two-year low. Home prices lagged 2.7% inflation. Chicago led with a 5.7% gain, while Tampa fell 3.9%, and Sun Belt markets like Phoenix, Dallas, and Miami also declined.
· The finalized EU-India trade deal creates a free trade zone covering a quarter of global GDP and two billion people after nearly 20 years of negotiations. It aims to open markets amidst US tariffs and Chinese controls, with the EU expecting exports to India to double by 2032
· Tether Holdings SA has emerged as the largest known holder of gold outside central banks and nation states, with holdings of around 140 tonnes valued at roughly USD 23 billion. The company is reportedly adding one to two tonnes per week and intends to continue doing so, providing an additional and increasingly significant source of demand alongside sustained central-bank buying and broad investor interest.
Key Points
· Equities: US was mixed as tech offset healthcare losses, Europe rose on earnings and trade hopes, Asia climbed ahead of the Fed.
· Volatility: Vix stable, Fed decision in focus, heavy mega-cap earnings
· Digital assets: BTC steady near $90k, ETH around $3k, ETF outflows, macro sensitivity remains
· Fixed income: Japan’s yields drop on orderly 40-year JGB auction. US awaits FOMC meeting today with no rate move anticipation.
· Currencies: USD blasted weaker after Trump comments on the US dollar, but move tempered in Asian hours. NOK surged.
· Commodities: Debasement trade lifts gold and silver as Trump talks down the dollar
· Macro events: Bank of Canada rate decision, FOMC rate decision