USD/CAD rises above 1.3800 as Bank of Canada keeps interest rates at 5%

• USD/CAD rises sharply towards 1.3800 as BoC keeps interest rates unchanged at 5%.
• The BoC’s decision on interest rates was widely expected.
• The price of oil drops as Israel’s ground assault on Gaza is delayed for the safe delivery of humanitarian aid.

USD/CAD rises towards the 1.3800 level as the Bank of Canada (BoC) has kept interest rates unchanged at 5%. BOC Governor Tiff Macklem announces neutral interest rate decision for the second time in a row.

The announcement of a neutral monetary policy was widely expected by the BoC, as inflation in Canada is systematically easing and labor market conditions are easing. The Canadian economy is registering inflation of 3.8%, almost double the desired rate of 2%.

The S&P500 opens on a bearish tone amid volatility caused by quarterly earnings and persistent fears of worsening conflicts in the Middle East. The risk profile is bearish given expectations of Iranian intervention in the conflict between Israel and Palestine.

Meanwhile, the DXY Dollar Index gains strength for a fresh move above the immediate resistance of 106.50. The Dollar Index regains traction as investors focus on this week’s crucial US economic data. The release of third-quarter Gross Domestic Product (GDP) and core Personal Consumption Expenditure (PCE) inflation for September could influence the Federal Reserve’s (Fed) interest rate decision, which will be announced on 1 of November.

According to expectations, the US economy grew 4.2% in the July-September quarter, almost double the growth rate recorded in the same period in 2022. An optimistic GDP report could raise hopes of a new rise in prices. interest rates by the Fed.

On the other hand, the price of oil closed lower for three consecutive sessions, as Israel’s ground assault on Gaza was delayed for the safe delivery of humanitarian aid.