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USD/CAD Holds Highs Near 1.4000 Amid Widening Interest Rate Gap

Guavy AI Editorial Team
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The USD/CAD pair continues to hold strong highs near 1.4000 as the interest rate gap between the US and Canada widens.

The Canadian Dollar has been under pressure due to the Bank of Canada's decision to keep its benchmark policy rate unchanged at 2.25%, while the Federal Reserve increased its key rate by 25 basis points to a target range of 3.75%-4.00% on Wednesday.

Strategists at Scotiabank emphasize that the widening US-Canada rate differentials are weighing notably on the Loonie, with their fair value model indicating an equilibrium exchange rate of 1.3894 and a degree of USD overvaluation in current spot rates.

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