This is an important week for interest rates. Central banks in both Canada and the US will be setting their base rates and they might be headed in separate directions.
The general consensus is that the Bank of Canada will hold its benchmark rate. We’ve seen reductions throughout 2025, measures economists say may be enough as employment numbers are holding up and inflation is static.
The story is slightly different in the US where their rate cutting has trailed our activity. And it is unclear whether they will hold the line or go down this week. If they do retreat a bit, it won’t affect rates on this side of the border but it could cause our currency to move.
Global money generally moves to higher rate environments as depositors look to get the best deal they can. When that happens, it also pushes the value of the currency of the recipient nation. Any reduction in the gap between Canada and the US should be favorable to the Canadian dollar, just in time for winter holidays.
