The Canadian dollar strengthened against the U.S. dollar on Thursday after the Bank of Canada raised rates and the Federal Reserve held steady. Investors now await U.S. GDP and inflation data for fresh clues on monetary policy.
The Canadian dollar extended gains against its U.S. counterpart on Thursday, following the Bank of Canada's rate increase and the Fed's decision to hold borrowing costs steady.
The loonie was trading near C$1.399 per U.S. dollar, or about 71.5 U.S. cents. However, the USD/CAD pair was down roughly 0.03% to 0.04% on the day, a modest strengthening of the Canadian currency.
Bank of Canada hikes while the Fed holds
The Bank of Canada raised its benchmark rate by 25 basis points to 2.50% on Wednesday, its first increase since July 2023. It warned that persistent energy-price pressures could spread to other goods and services, and it raised its inflation outlook. Further tightening remains possible if price pressures persist.
By contrast, the Federal Reserve kept its rate in the 3.75%-4.00% range. The U.S. central bank described economic activity as strong but left investors uncertain about the timing of its next move. The U.S. dollar weakened after the decision, which helped support the Canadian currency.
U.S. data and oil in focus
Next, traders turn to U.S. gross domestic product and personal consumption expenditures inflation data, due at 8:30 a.m. ET on Thursday. The figures could shape expectations for Federal Reserve policy and trigger fresh moves in the dollar.
Uncertainty over inflation, energy prices and U.S.-Canada trade relations could limit further gains for the loonie. The currency is sensitive to commodity prices, so oil-market movements and bilateral trade talks could also set its direction.
Source: Investing.com
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