UDCAD Stabilizes Above 1.38 Ahead of BOC Cut and PM Trudeau Ousting

USDCAD climbed above 1.38 again yesterday after the retreat last week, and the BOC meeting tomorrow points to further gains. The Bank of Canada is expected to deliver a 50 bps rate cut tomorrow and perhaps keep a dovish bias for the future, while the political landscape is also shifting in Canada, which might also weigh on the CAD, supporting USD/CAD further.

USD/CAD Chart H4 – Holding Above MAs

Bank of Canada Meeting Tomorrow

Since the final week of September, the USD/CAD has experienced a significant upswing, rising over 4 cents. The currency pair continued to climb after Canada’s inflation report showed another drop in the headline rate, peaking at 1.3838. However, after this steady rally, it saw a slight pullback of 1 cent last week. Today, the price has been stabilizing, although recent pullbacks seem to have ended, with the pair recovering above 1.38 yesterday.

Despite the pause in momentum, the US dollar remains broadly supported due to a lack of catalysts. Market expectations have shifted dramatically, with the probability of a 50 basis point rate cut in Canada now at 99%, up from 48% prior to the inflation report. Following this, markets also expect at least a 25 basis point cut in December, with more reductions likely into 2025.

Liberals to Sack PM Trudeau Tomorrow?

Political developments are adding another layer of uncertainty in Canada. Prime Minister Justin Trudeau faces potential ousting by his own Liberal Party ahead of the general elections. Polls show the Liberals trailing the Conservatives by 20 points, with the gap widening. Reports suggest that up to 30 Liberal MPs have signed an internal document urging Trudeau to step down before tomorrow’s caucus meeting.

Technically, USD/CAD has recovered above the 1.3745 level and advanced toward 1.3850 today. The current slowdown is due to proximity to a key resistance zone. Sellers may intervene near the 1.3860 barrier to position for a potential pullback, otherwise, the pair could move higher toward 1.39.

USD/CAD Live Chart