BoC cuts rates to 2.50%, signals caution on further easing – OCBC

BoC cuts rates to 2.50%, signals caution on further easing – OCBC

The Bank of Canada delivered an expected 25bp rate cut, lowering its key policy rate to 2.50%. USD/CAD was last at 1.3771 level, OCBC's FX analysts Frances Cheung and Christopher Wong note.

USD/CAD holds 1.3780, watching 1.3730 support zone

"The central bank, however, set a high bar for a back-to-back cut at its upcoming October meeting signalling a cautious stance ahead. BoC Governor Tiff Macklem highlighted that the Canadian economy is facing dual headwinds: the impact of US tariffs and the persistent unpredictability of global trade policies."

"However, he emphasised the central bank will 'carefully assess' how these factors spill over into areas like business investment, employment, and household spending. On inflation, the BoC maintained its outlook for core inflation to hover around 2.5% in the near term but noted that upside risks to inflation have eased. Market expectations for additional rate cuts this year was pared, with pricing for a follow-up cut at the October meeting having fallen to around 50%."

Two-way trades are likely as we stay cautious on a tactical USD bounce post FOMC. A decisive break below the support zone around 1.3730–1.3740 would clear a path to the next key support level at 1.3600. On resistance, immediate resistance is now at 1.3860, with a secondary resistance level following at 1.3940.