USD/CAD gives up intraday gains as USD’s recovery trims

Source Fxstreet
  • USD/CAD falls back and turns flat as the recovery move in the US Dollar has shortened.
  • US Trump has expressed confidence that trade talks with Mexico and Japan went smoothly.
  • The BoC has warned that a long-lasting global trade war could push the economy into a deep recession.

The USD/CAD pair surrenders its intraday gains and falls back to near 1.3860 during North American trading hours on Thursday. The Loonie pair retreats as intraday gains in the US Dollar (USD) have trimmed, even though United States (US) President Donald Trump has signaled that Washington is making decent progress in closing bilateral deals with Japan and Mexico.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls slightly from its intraday high of 99.60 to near 99.45.

"Had a very productive call with the President of Mexico yesterday. Likewise, I met with the highest-level Japanese Trade Representatives. It was a very productive meeting. Every Nation, including China, wants to meet! Today, Italy! US President Donald Trump wrote in a post on Truth.Social platform in late European trading hours on Thursday. 

On Wednesday, the Bank of Canada (BoC) left interest rates steady at 2.75%, as expected, and warned that a potential spike in inflation due to a potential Trump-led global trade war could push the economy into a “deep recession”. The BoC didn’t release its economic forecast but provided two scenarios amid uncertainty over how Trump’s tariff policy will shape the Canadian economic outlook.

In the first scenario, if the majority of tariffs are negotiated away, the Canadian and global growth would weaken temporarily. Inflation might fall to 1.5% for a year and then return to the central bank’s 2% target.

In the second scenario, a long-lasting global trade war will push the economy into a significant recession, and inflation will spike above 3% in mid-2026 before returning to 2%.

 

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.


Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold Price Forecast: Why Are Gold Prices Still Falling as the Fed Pauses Rate Hikes? September PCE May Determine DirectionOn Thursday (October 29), gold prices (XAUUSD) continued to pull back after the Federal Reserve announced its latest interest rate decision. As of the Asian session on October 29, gold pr
Author  TradingKey
11 hours ago
On Thursday (October 29), gold prices (XAUUSD) continued to pull back after the Federal Reserve announced its latest interest rate decision. As of the Asian session on October 29, gold pr
placeholder
Microsoft passed the free-cash-flow test. Alphabet failed it by $9 billion — and Amazon is nextMicrosoft's Azure grew 48% and free cash flow came in at $18.6 billion; Alphabet's cloud grew 103% but free cash flow was negative $9.07 billion and the stock fell about 9.3% after hours. The AI capex test from October 26 now has a scorecard: Microsoft is the cushion, Alphabet is the warning, and Amazon reports tonight.
Author  Irene Q.
17 hours ago
Microsoft's Azure grew 48% and free cash flow came in at $18.6 billion; Alphabet's cloud grew 103% but free cash flow was negative $9.07 billion and the stock fell about 9.3% after hours. The AI capex test from October 26 now has a scorecard: Microsoft is the cushion, Alphabet is the warning, and Amazon reports tonight.
placeholder
The Fed held at 3.75%–4.00% — and two officials voted to hike. December is now 85% pricedThe FOMC held by a 10–2 vote, with Governor Cook and Cleveland Fed President Hammack dissenting for a 25bp hike. Chair Warsh offered no forward guidance and no dot plot, the 2-year yield fell 8bp to 4.70%, and the dollar slipped to 101.84 even as markets moved December hike odds to 85%–87%. Tonight's Q3 GDP and September core PCE are the next referee.
Author  Irene Q.
18 hours ago
The FOMC held by a 10–2 vote, with Governor Cook and Cleveland Fed President Hammack dissenting for a 25bp hike. Chair Warsh offered no forward guidance and no dot plot, the 2-year yield fell 8bp to 4.70%, and the dollar slipped to 101.84 even as markets moved December hike odds to 85%–87%. Tonight's Q3 GDP and September core PCE are the next referee.
placeholder
Gold Price Analysis Today | Forex Gold Analysis | XAU/USD Analysis - October 29, 2026Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 29, 2026. Read on for the details.
Author  Mitrade
19 hours ago
Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 29, 2026. Read on for the details.
placeholder
Today’s Market Recap: Fed Holds Rates Steady, Memory Chip Sector Surges, Micron Up Over 5%, SanDisk Up Over 7%, Google Drops Nearly 10% After HoursOn October 28, Eastern Time, the three major U.S. stock indices closed slightly higher across the board. The Federal Reserve announced it would keep interest rates u
Author  TradingKey
19 hours ago
On October 28, Eastern Time, the three major U.S. stock indices closed slightly higher across the board. The Federal Reserve announced it would keep interest rates u
goTop
quote