UPDATE: Rabobank has just announced a forecast indicating that the USD/CAD currency pair is expected to trade within a range of 1.34–1.36 as the interest rate gap between the United States and Canada narrows. This significant development comes as the Bank of Canada (BoC) approaches a pivotal decision in its monetary policy, with a potential interest rate cut on the horizon.
Rabobank anticipates that the BoC will implement one final 25 basis point rate cut, likely during its upcoming meeting in October. This would mark a crucial shift in Canadian monetary policy, as the BoC’s current policy rate remains at 2.75% since its last hold in July. However, analysts warn that the risk leans towards no further easing beyond this anticipated cut.
Looking further ahead, Rabobank forecasts that the current interest rate differential of 175 basis points will shrink to approximately 75 basis points by the end of 2026. This prediction is based on expectations that the Federal Reserve will initiate an aggressive rate-cutting cycle, while the BoC is likely to have reached its terminal rate of 2.50% by that time.
The narrowing rate spread is expected to increasingly influence the USD/CAD exchange rate. Rabobank emphasizes that this dynamic will create a trading environment dominated by the 1.34–1.36 price zone, which has shown heavy congestion throughout 2023 and 2024.
The implications of this forecast are significant for businesses and individuals engaged in cross-border trade and finance between the U.S. and Canada. As the economic landscape evolves with these anticipated changes, stakeholders must stay vigilant to capitalize on potential opportunities or mitigate risks associated with currency fluctuations.
This news is developing rapidly, and stakeholders are urged to monitor updates closely. Analysts and investors alike should prepare for potential market volatility as the BoC meeting approaches and the broader economic conditions unfold. Share this urgent update to keep others informed about the shifting landscape of the USD/CAD currency pair.
