The Canadian dollar hits a 15-month low against the US dollar, with the central bank rate decision becoming the key factor

The recent decline in the Canadian dollar against the US dollar to its lowest level in 15 months has sparked widespread market attention regarding the Bank of Canada’s policy direction. Investors generally expect the Bank of Canada to keep the benchmark interest rate unchanged at 2.25%, reflecting the complexity of the current macroeconomic situation.

Central Bank Policy Considerations Behind the Weakening Exchange Rate

Michael Pfister, an analyst at Deutsche Bank, pointed out that considering the slight uptick in inflation and the moderate growth of the real economy, the probability of the Bank of Canada significantly cutting interest rates again this year is relatively low. This assessment indicates that the Canadian dollar lacks upward momentum from interest rate policy. Based on multiple indicators tracked by Jin10 Data, the stability of central bank policies will be a key factor supporting the Canadian dollar.

External Risks Limiting the Canadian Dollar’s Upward Potential

Although the central bank policy remains relatively stable, external factors have clearly constrained the Canadian dollar’s upward movement. Michael Pfister further noted that the ongoing threat of US tariffs could limit the CAD’s appreciation against the USD. These geopolitical and economic risks not only affect foreign exchange market expectations but also influence Canada’s domestic economic growth outlook, thereby impacting investors’ willingness to allocate assets in CAD. The current record low exchange rate is the result of these combined pressures.