The Canadian dollar strengthened against most major currencies Thursday after the Bank of Canada delivered a widely anticipated 25 basis point rate cut, bringing its benchmark rate to 2.75% – the lowest level since July 2022. This seventh consecutive easing move comes as inflation holds steady at 1.9%, comfortably within the central bank’s target range, despite growing headwinds from U.S. trade actions.
The loonie’s gains defied initial expectations, as markets had largely priced in the rate reduction. Analysts attribute the currency’s resilience to two key factors: first, the BoC’s statement suggesting this may conclude the current easing cycle absent further economic deterioration; second, the political certainty following Mark Carney’s ascension to Prime Minister, with his pledge to prioritize economic stability amid global trade tensions.
However, the central bank struck a cautious tone, warning that monetary policy cannot fully offset the impacts of the newly imposed U.S. steel and aluminum tariffs. Market participants now await Friday’s employment data for further clues on Canada’s economic trajectory, with the loonie’s outlook remaining closely tied to both domestic labor market trends and the evolution of North American trade relations.
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