USD/CAD settles above 3-week low, posts weekly loss

The USD/CAD currency pair settled above recent low of 1.3726, its weakest level since August 29th, in the wake of the Federal Reserve’s and the Bank of Canada’s policy decisions.

The Fed lowered its federal funds rate target range by 25 basis points to 4.00%-4.25% at its September meeting and indicated another 50 basis points of rate cuts by the end of the year.

Fed Chair Jerome Powell described the September policy action as a risk-management cut addressing the weakening labor market. Powell also noted the central bank was in a “meeting-by-meeting situation” in regard to the rate outlook.

Markets are now pricing in about a 92% chance of another 25 basis point Fed rate cut in October.

Meanwhile, the Bank of Canada cut its benchmark interest rate by 25 basis points to 2.50% at its September 17th policy meeting, in line with market consensus.

The decision followed three consecutive holds.

Policy makers highlighted the Canadian economy showed signs of fragility to US tariffs after an initial period of resilience. This was evidenced by a 1.6% GDP contraction in the second quarter amid a 27% drop in exports.

At the same time, CPI inflation was below the 2% target in August, creating room for easier policy to address growth concerns.

The major Forex pair lost 0.52% for the week.