USD/CAD Surges as Fed Rate Hike Expectations Take Hold
The USD/CAD currency pair rose on Monday as Fed rate hike expectations lifted the US Dollar to a nearly two-week high. The Canadian Dollar, linked to oil prices, provided little support. At 1.3898, the pair remained bullish for a fourth consecutive day.
Markets are awaiting the Federal Reserve's interest rate decision on Wednesday, with a 92.7% probability of a 25-basis-point increase. This would widen the interest rate gap between the Fed and the Bank of Canada, which held its policy rate at 2.25% earlier this month.
Canadian inflation remained steady at 3% year-over-year in August, with underlying inflation pressures contained. Economists at Royal Bank of Canada believe the Bank of Canada will hold interest rates through 2026 before gradually raising them in 2027 as the economy strengthens.
The USD/CAD chart shows a double-bottom formation, with the pair bottoming at 1.3732 in August and finding support again at 1.3759 earlier this month. The 100-day Simple Moving Average (SMA) at 1.3931 caps the immediate upside, while momentum signals are improving.