The Canadian dollar strengthened to around 1.40 per USD in July, reaching its strongest level in nearly a month after the Bank of Canada kept its key policy rate unchanged at 2.25%, as widely expected.
The central bank struck a relatively hawkish tone, noting that the economy is showing signs of improvement, with stronger growth projected over the medium term and inflation expected to remain above previous forecasts in 2026 before gradually easing.
Policymakers also highlighted persistent risks stemming from the conflict in the Middle East and US trade policy, reinforcing expectations that interest rates will remain unchanged for an extended period.
The loonie also benefited from a softer US dollar after US producer prices came in below expectations.
