Dollar Slips Before Fed as Loonie Falls on BOC Hold
A Bloomberg gauge of the dollar slipped ahead of the Federal Reserve’s December interest-rate decision, at which traders widely expect a quarter point cut and remain focused on the outlook for easing in 2026. The loonie fell to the day’s low after the Bank of Canada held rates steady but signaled “ongoing economic slack” offsetting cost pressures.
The Bloomberg Dollar Spot Index down 0.1% after two days of gains
Overnight vol on BBDXY spikes into meeting but remains relatively contained compared to prior event risks this year.
With a 25 bp Fed cut widely anticipated by traders, attention is on the central bank’s latest dot plot, economic projections and comments from Chair Jerome Powell.
Treasuries gain across curve; 10-year yield down 1 bp to 4.18%.
“All of the other information that we’re going to get will probably have a hawkish shift,” Tiffany Wilding, economist at Pimco, told Bloomberg TV. “We ultimately think the Fed is likely to be on hold” through the remainder of Powell’s term.
Loonie falls to day’s low following Bank of Canada rate hold; USD/CAD up 0.2% to 1.3872 high following announcement
“Uncertainty remains elevated,” the BOC’s statement read
“The Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target”
Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers are expected to speak at roughly 10:30 a.m. New York time
“If we are right about a hawkish cut from the Fed, we like selling USD/CAD on rallies, with 1.3900 an attractive level to enter,” said Sarah Ying, head of currency strategy at CIBC Capital Markets in Toronto.
USD/JPY falls 0.3% to 156.40 as selling accelerates in the New York morning session.
Earlier, leveraged accounts sold into fix-related demand for dollars, according to an Asia-based FX trader.
EUR/USD rises 0.2% to 1.1650
Money markets now favor a rate hike by the European Central Bank in 2026.
Source : Bloomberg.com
