Fed Officials Weigh in on Hike Timing as USD/CAD Hits New High

USD/CAD broke above 1.4200 for the first time since early July but then fell back twice after Fed officials expressed differing views on the timing of a potential rate hike.

New York Fed President Williams said there's no rush to hike again, while Governor Barr in Detroit stated that high energy prices and AI investment mean more hikes are likely needed. This mixed message from the Fed kept the odds of an October hike at around 70%, with most indicators still pointing towards a higher USD/CAD.

The Canadian economy has been flat since July, with a 0.2% growth forecast for August. The Bank of Canada's bond purchases may start in late 2027 or possibly 2028, which could influence the CAD's value. The core PCE price index is expected to rise 0.3% MoM on Wednesday, keeping an October Fed hike priced.