USD/CAD is trading below its 200-day moving average (1.3952) as investors await the Bank of Canada (BOC) interest rate decision. Analysts at BBH FX expect the central bank to deliver a 25bps cut to 2.25%, noting that this is unlikely to signal the start of a more aggressive easing cycle, given strong inflation and upcoming fiscal support.
The swaps market currently prices a 90% probability of today’s 25bps cut, and roughly 50% odds of an additional cut to 2.00% over the next year, amid ongoing uncertainty from U.S.-Canada trade tensions. Last week, U.S. President Trump ended trade negotiations with Canada and threatened to raise tariffs on Canadian goods by 10%, following Ontario’s criticism of the White House tariffs.
BBH analysts caution against expecting cuts below 2.25%, the lower end of the neutral range, noting that Canada’s upcoming budget on November 4 is likely to provide economic stimulus. By contrast, the UK budget on November 26 may weigh on growth, leaving room for the Bank of England to ease further, supporting expectations of GBP underperformance versus CAD.