The Bank of Canada (BoC) is anticipated to maintain its policy rate at 2.25%, amidst global economic uncertainties and the upcoming USMCA renegotiation in 2026. The current gains in part-time jobs contribute to the Canadian dollar’s potential short-term weakness.<\/p>\n
The global market is experiencing a re-pricing phase, with expectations of a 30 basis point BoC hike by October next year. Despite government fiscal support, the BoC remains cautious, influenced by its recent monetary policy report focusing on a negative global economic outlook.<\/p>\n
The BoC avoids premature rate hikes for 2026, given the reliance on part-time employment figures. This cautious stance reflects potential risks for the Canadian dollar, with uncertainties magnified by the projected USMCA talks.<\/p>\n
We see the Bank of Canada holding its policy rate at 2.25% today, creating a clear split from the more aggressive stances seen globally. This policy divergence is likely to put downward pressure on the Canadian dollar in the near term. Derivative strategies should therefore be positioned for this expected weakness against other major currencies.<\/p>\n
The central bank’s caution is understandable when looking at the data from the November 2025 Labour Force Survey. We saw a net gain of only 5,000 full-time jobs, which was overshadowed by a 45,000 increase in part-time positions. With core CPI inflation holding steady at 2.6%, there is little domestic pressure for the Bank to act immediately.<\/p>\n
We also believe the upcoming 2026 USMCA renegotiation is making policymakers hesitant, with recent reports indicating friction over dairy and digital trade rules. This contrasts sharply with the Reserve Bank of Australia, which has hiked its cash rate to 4.85%, widening the policy gap. This difference makes holding Canadian dollars less attractive.<\/p>\n
For the coming weeks, we see value in buying out-of-the-money put options on the CAD or call options on the USD\/CAD pair. This strategy offers a defined-risk way to profit from a potential slide in the currency. The subdued implied volatility could make these options relatively inexpensive at the moment.<\/p>\n
This situation reminds us of the 2014-2016 period, when a diverging policy path between the Bank of Canada and the US Federal Reserve led to a sustained decline in the loonie. During that time, the USD\/CAD exchange rate moved from near parity to above 1.45. A similar, though perhaps less dramatic, trend could unfold as we head into 2026.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" BoC holds rate at 2.25% amid global uncertainties, job market trends, and USMCA renegotiation concerns.<\/p>\n","protected":false},"author":62,"featured_media":17028,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36486","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36486","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=36486"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36486\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17028"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=36486"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=36486"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=36486"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}