The Canadian dollar maintains an upward trend during the continuation phase of its rally.

The Canadian dollar (CAD) is seeking a more substantial appreciation against the US dollar (USD). Technically, the CAD’s rebound continues to gather momentum, though upward impetus is gradually weakening. Rising Canadian inflation has made future rate-cut expectations for the Bank of Canada (BoC) increasingly uncertain. On Monday, the CAD exhibited some volatility against the USD, rebounding from a 30-week low and initiating a much-needed technical correction. CAD traders are eagerly awaiting further developments in Canada–US trade relations, as well as clearer signals—before year-end—on whether both the BoC and the US Federal Reserve (Fed) will continue cutting rates. In recent weeks, Canadian Prime Minister Mark Carney has repeatedly stated that trade negotiations between his office and the Trump administration have not resumed since President Donald Trump abruptly halted all communication. Trump reportedly became enraged by a televised advertisement quoting former US President Ronald Reagan criticizing trade tariffs; Trump has long preferred achieving ‘victory’ through costly trade wars. With trade talks remaining deadlocked, the Trump administration struggles to substantiate claims of imminent victory in a hardline trade war against Canada—even though core members of Trump’s team frequently assert such a win is already in the works. Daily Market Update: The Canadian dollar continues its upward momentum, with central bank policy exerting downward pressure on the USD/CAD exchange rate. After hitting a six-month low against the USD last week, the CAD is gradually recovering ground. Given market expectations that the BoC will hold interest rates steady until the end of 2026, the CAD’s upside potential may receive support—though this could change if economic conditions deteriorate further.

Exness: Latest survey suggests Canadians are growing increasingly concerned about inflation—will the Canadian dollar strengthen noticeably?

According to Eric, an analyst at Exness, rising inflation expectations imply the Bank of Canada is unlikely to signal clear monetary easing in the near term. Even if some price pressures stem from energy costs, as long as consumers begin to believe inflation will not quickly return to the 2% target, the central bank must maintain a restrictive monetary stance for longer to prevent inflation expectations from drifting further from its goal. Such a policy shift provides some support to the Canadian dollar, as markets may need to reassess prior expectations of future policy loosening. However, the environment facing the Bank of Canada is far from straightforward. Canadian economic growth is losing some steam, the labor market has notably cooled compared with earlier periods, and high housing costs coupled with elevated borrowing rates continue to suppress household consumption. This means that further rate hikes—while potentially helpful for curbing inflation—could also further weaken the real estate sector, consumer spending, and employment. Consequently, the BoC’s future policy direction will depend not only on inflation levels but also on whether current price pressures stem primarily from domestic demand or mainly from external factors such as energy and other imported costs. If inflation is driven largely by robust demand and wage pressures, hiking rates can effectively dampen demand; yet if price increases stem predominantly from energy supply constraints and transportation costs, higher interest rates offer relatively limited impact. This explains why rising consumer inflation expectations—while strengthening the case for the BoC to maintain a hawkish stance—do not yet confirm the onset of a new hiking cycle. Oil prices add another layer of support for the Canadian dollar. As one of the world’s major energy exporters—and unlike energy-importing economies such as Europe, Japan, and the UK—higher oil prices not only intensify domestic inflationary pressures but also boost energy export revenues and improve Canada’s terms of trade. Thus, elevated oil prices currently affect the CAD through two channels: first, increasing inflationary pressure, making it harder for the BoC to pivot toward easing; second, improving Canada’s export earnings, thereby supporting the currency directly. Nonetheless, the US dollar remains a key constraint on further CAD strength. US long-term Treasury yields remain elevated, and the Fed shows no clear signs of shifting toward easing. So long as US interest rates stay high, the BoC’s mere maintenance of a hawkish stance is insufficient to meaningfully narrow the Canada–US interest-rate differential. Whether the CAD can appreciate further hinges largely on whether market expectations for interest rates in the two countries begin to diverge significantly. Therefore, while the CAD’s fundamental backdrop has improved somewhat this week, its upside potential still depends on the relative policy paths of the Bank of Canada and the US Federal Reserve.

Canadian Dollar Poised for Best Month Since April After BOC Hike

Oct 29, 2026

The Canadian dollar strengthened following a Bank of Canada rate hike, supported by elevated oil prices and inflation concerns impacting energy costs.

bloomberg

2026-04-29

Bank of Canada Holds Interest Rates at 2.25%, Cites Oil Price Risks

2026-05-13

Bank of Canada Sees No Clear Rate Path Amid Tariff and Oil Risks

2026-06-10

Bank of Canada Holds Rates, Notes Limited Inflation Impact from Energy Prices

2026-07-06

Bank of Canada Survey Shows War Boosted Inflation Expectations and Investment

2026-07-14

Bank of Canada Likely to Hold Rates as Hormuz Blocked