USD/CAD hits weekly highs after BoC rate decision

The Bank of Canada has raised rates as expected, however, the Canadian dollar weakens after the rate policy announcement.

The USD/CAD pair jumps but then pulls back toward 1.3400. the pair is trading at 1.3419, at the time of typing. The USD/CAD jumped by more than 50 pips after the decision of the Bank of Canada and climbed to 1.3425, reaching the highest level since last Friday.

Are more hikes expected?

The Bank of Canada, as expected, raised the key interest rate by 25 basis points to 4.5%. In the statement, the central banks mentioned that will likely hold rates at this level while assessing the impact of recent policy moves.

Following the announcement, the CAD weakened across the board. The USD/CAD rose from 1.3365 to 1.3426. It then pulled back. CAD’s crosses remain volatile as market participants digest the decision.

The BoC signals that its intention is to remain on hold which is not a surprise for markets. Analysts were considering that the hike at the January meeting could be the last one, taking into account the current economic outlook.

The USD/CAD retreated under 1.3400 after a few minutes. More volatility is expected. The pair needs to remain well above 1.3400 to keep the doors open to more gains over the next hours. The next resistance stands at 1.3440. The key support is the 1.3340 area and a break lower could trigger a bearish acceleration toward 1.3300.