Brown Brothers Harriman’s Elias Haddad highlights that USD/CAD has pulled back after testing a six‑month high but still risks grinding higher toward 1.4140. The Bank of Canada is widely expected to keep rates on hold and maintain policy optionality, while Canada’s contained inflation backdrop allows an extended pause despite firmer recent employment and GDP data.

BoC pause leaves room for USD/CAD gains

"USD/CAD retreated lower after testing a six-month high of 1.3969 yesterday. In the short-term, the risk is USD/CAD grinds up to 1.4140 (November 2025 high) because there is room for Bank of Canada (BOC) rate hikes bets to adjust lower."

"The BoC is widely expected to keep the policy rate on hold at 2.25% for a fifth straight meeting (2:45pm London; 9:45am New York) BoC is also poised to stick to its two-way policy optionality introduced in April that new US trade restrictions on Canada would argue for cuts, but persistently high energy prices could warrant “consecutive increases in the policy rate.”"

"The swaps curve more than fully price-in 50bps of rate hikes over the next twelve months. In our view, Canada’s contained inflation backdrop gives the BoC scope to keep rates on hold for an extended period and assess whether the rebound in May employment and April real GDP is sustained."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)