Loonie Slumps to Six-Week Low as Fed Hikes Interest Rates

The Federal Reserve's decision to raise interest rates sent shockwaves through the markets, causing the Loonie to plummet to a six-week low against the US dollar.

The USD/CAD currency pair rose by 48 pips to reach a high of just under 1.4000, with the Bank of Canada's overnight rate remaining unchanged at 2.25% despite seven consecutive meetings without an increase.

The rate gap between the two countries has widened from 1.375 points to 1.625, with the Fed projecting interest rates to reach 4.1% by December and remain there through 2027.

This move is seen as a significant shift in monetary policy, with the Fed taking action to address inflation concerns, while the Bank of Canada has not followed suit, despite rising oil prices normally supporting the Canadian currency.