Bank of Canada Holds at 2.25%; USD/CAD Hits 1.37

The Bank of Canada left its policy rate unchanged at 2.25% in its policy announcement, marking the fourth hold since October 2025. The central bank described the economic outlook as little changed from its January decision. A press conference is scheduled to begin shortly and markets are watching for further clarity.

The Quarterly Monetary Policy Committee projections cited weaker-than-expected domestic activity, a factor that has reduced market pricing for near-term rate increases. The Bank noted those projections when explaining its decision to maintain the current stance.

The Bank said it had assumed a crude oil price of $75 per barrel in its projections and highlighted the impact of higher oil prices on the economy. “Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices,” the Bank wrote in its statement. The Bank added that stronger oil revenues could alter the policy outlook if prices remain elevated.

West Texas Intermediate crude rose above $100 a barrel amid renewed tensions in the Middle East. The oil rally coincided with upward pressure on the U.S. dollar ahead of a Federal Reserve event this week, contributing to the Canadian dollar's decline.

In foreign-exchange markets, USD/CAD bounced from a support zone near 1.3660 and moved above shorter-term moving averages to trade around 1.37. Near-term resistance sits close to the 50-day moving average at roughly 1.3733 and within a resistance band between 1.3720 and 1.3750. A sustained move above 1.3750 could push the pair toward 1.38 and then the 1.3850–1.3870 momentum pivot, with a potential extension to the 1.39–1.3925 area if bullish momentum continues. Immediate downside support is near the 200-hour moving average around 1.3675, with a key support band between 1.3630 and 1.3660 and longer-run support near 1.3550 and end-January lows around 1.3482.

Market participants noted the Bank's relatively steady stance tempered the Canadian dollar's gains before the oil price spike. Traders are preparing for comments from Bank of Canada officials at the press conference and for Federal Reserve policy remarks, either of which could influence the U.S. dollar and USD/CAD.

The Bank has balanced concerns about domestic demand and inflation in recent months and has paused rate increases while monitoring global energy markets and household spending. As a net oil exporter, Canada’s national income and fiscal outlook respond to crude price swings, which can affect currency valuation and central bank policy considerations.