USD/CAD trades flat on Wednesday as traders show a limited reaction to the latest Bank of Canada (BoC) monetary policy announcement. At the time of writing, the pair trades around 1.4051, hovering near a one-month low.
The BoC left its policy rate unchanged at 2.25%, as widely expected. In its monetary policy statement, the central bank said the current rate remains appropriate to support the economic recovery and return inflation to its 2% target, in line with the latest Monetary Policy Report projections.
The BoC acknowledged that uncertainty remains high and said the Governing Council will continue to assess the strength of the Canadian economy and the inflation outlook. It also reiterated that policymakers are prepared to adjust interest rates if needed.
In its latest Monetary Policy Report, the BoC lowered its 2026 economic growth forecast to 0.7% from 1.2%. Second-quarter growth is estimated at an annualized rate of 2.5%, followed by 1.5% in the third quarter.
The central bank also raised its 2026 inflation projection to 2.5% from 2.3% and expects inflation to return to its 2% target by early 2027. It identified US trade policy and the war in the Middle East as the two biggest risks to the outlook.
Traders now await BoC Governor Tiff Macklem’s post-meeting press conference for more clues on the central bank’s policy outlook.
On the US side, softer-than-expected Producer Price Index (PPI) data weighs on the US Dollar (USD), although the Canadian Dollar (CAD) struggles to benefit, leaving USD/CAD broadly unchanged.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades around 100.80 after easing from an intraday high of 101.03.
Headline PPI fell 0.3% MoM in June after rising 0.6% in May, below the forecast of 0%. Annual producer inflation slowed to 5.5% from 6.0%, undershooting expectations of 6.2%.
Core PPI rose 0.2% MoM, below the expected 0.4% increase but above May’s 0.1% gain. The annual core rate edged up to 4.7% from 4.6%, although it came in below the 5.2% forecast.
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