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USD/CAD drops after the Fed holds rates and narrows hike odds
After a 9 to 3 Fed decision, USD/CAD fell to just below 1.4050, while pricing for additional September and December increases moved lower.
The Federal Reserve held its target range at 3.50% to 3.75% in a 9 to 3 vote, and three members preferred an immediate quarter point increase, according to FXStreet. In FX trading, USD/CAD slid out of its session range and printed a low just beneath 1.4050.
FXStreet said the Bank of Canada side of the day offered no new material, with its Summary of Deliberations at 17:30 GMT producing nothing at all and leaving the Canadian rate near the 1.4100 handle unmoved.
The move in USD/CAD came as market expectations for more Fed hikes narrowed. FXStreet reported that at least one increase by 16 September is priced near 64%, down from about 80% before the meeting, while October is near 75% and December near 85%.
FXStreet also noted that the probability of at least two increases by 9 December fell to roughly 42% from 57%, with the most likely December outcome now seen as one step rather than two. The outlet attributed the broader shift to the Fed decision and hawkish statement tone, while also pointing to both central banks being influenced by energy assumptions tied to moves they do not control.