BoC’s 25 bps Cut Could Weaken CAD—Unless the Fed Joins In

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.4330-1.4550

Euro                 1.4910-1.5130

Sterling            1.7810-1.8030

WTI Oil (opening level) $73.25

The CAD is opening at 1.4435 ( 0.6927 )

The announcement today from the BoC on interest rates- which will probably be a 25 bps cut- to bring the rate to 3.0%. This will likely lead to a weaker CAD. But then- later in the day- the FED will have its say on their interest rate policy and if they drop their rate along with language that supports further cuts then the CAD may actually get stronger.

Headlines

·    The Aussie weakened on the back of the CPI data overnight, with AUDNZD touching its lowest level of the year below 1.1010 at one point as the market price in firmer odds of a cut from the RBA this month, with more cuts to follow later this year.

·    The US dollar traded flat after starting the week with a jolt higher on the latest Trump comments on wanting to assess “much bigger” broad tariffs than the 2.5% level suggested by Secretary of Treasury Bessent.

·    OpenAI says it has found evidence that Chinese AI startup DeepSeek used OpenAI’s models to train its models, which could represent intellectual property theft. The technique of “distillation” could have allowed a smaller AI model like DeepSeek’s to learn from the output of larger models like OpenAI’s ChatGPT. White House AI czar David Sacks said that “it is possible” that this is a form of intellectual property theft. Could the Trump administration use this as grounds for imposing tariffs?

Key Points 

·    Equities: Tech rebounds; Nvidia +8.9%; Fed meeting in focus; Europe hits record highs

·    Volatility: VIX drops; market stabilizes ahead of Fed, ECB, and earnings catalysts

·    Digital Assets: : Bitcoin recovers; Czech central bank eyes BTC reserves

·    Currencies: USD mixed ahead of FOMC, AUD hit by weak CPI readings

·    Commodities: Crude and copper keep dancing to the rhythm of Trump's tariff orchestra

·    Fixed Income: US yields trading near key lows ahead of FOMC

·    Macro events: Sweden’s Riksbank, Bank of Canada, FOMC Rate Decision