The Canadian dollar leveled off against the currencies of the U.S. and Japan in early trading on Tuesday ahead of the closely watched Bank of Canada interest decision, which is scheduled at 9:00 am ET.
The central bank is widely expected to keep rates on hold at 1 percent. While few economists are expecting anything other than the status quo from the Central Bank, the meeting will be closely watched for signs that monetary policy stimulus will be withdrawn.
In holding steady on interest rates last time, the Bank of Canada acknowledged that the persistent strength of the Canadian dollar could "create even greater headwinds for the Canadian economy."
Hinting that a rate hike may be in the cards in the coming months, the BoC said in its previous meeting that it expects the high energy prices and changes in provincial indirect taxes will keep total consumer price inflation above 3 percent. The central bank targets 2 percent as a healthy level of annul inflation.
The loonie paused its rally even as the price of crude oil, Canada's largest export, edged up today morning amid a weak U.S. dollar.
Light Sweet Crude Oil (WTI) futures for August delivery were up $0.93 to $96.86 a barrel. Yesterday, oil slipped over 1 percent on worries about the U.S. debt ceiling and the EU debt crisis.
In news bullish to oil, Goldman Sachs predicted that crude and heating oil prices will rise in the next year as global demand increases amid tightening supplies. In its Commodity Watch forecast report, the investment banking said WTI crude prices would hit $126.50 a barrel in a year's time.
The Canadian dollar that reached as high as 0.9547 against the US dollar around 4:25 am ET moved in a tight range between 0.9570 and 0.9550 in the succeeding trading hours. On the upside, the loonie may test support around the 0.9520 level. The greenback-loonie pair is presently trading at 1.3539.
The Canadian dollar also moved in a similar fashion versus its Japanese opponent, moving off its early highs of 82.83 and was trading in a range-bound pattern between 82.80 and 82.55. The loonie-yen pair is presently worth 82.70 with 82.40 seen as the next support level and its 50-day SMA of 83.0 seen as the probable resistance.
The Canadian dollar that fell to a 4-day low of 1.3588 against the euro around 5:15 am ET recouped almost 60 pips to reach as high as 1.3530 before holding steady around 6:45 am ET. If the Canadian currency strengthens further, it may find target around the 1.35 level in near-term. The pair is presently trading at 1.3537.
Investors remained cautious ahead of an outcome of an emergency euro zone summit scheduled for Thursday in Brussels to finalize a second round of aid for Greece after the results of the stress tests on the region's banks failed to win investor confidence.
Germany's economic sentiment worsened more than expected in July, the Mannheim-based ZEW Centre for European Economic Research said today. The corresponding indicator slipped to minus 15.1 in July from minus 9 in June. Economists had expected the indicator to fall to minus 12.5.
Besides the much awaited BoC rate, traders are also likely to focus on the releases of Canada's leading indicators and the U.S. building permits and housing starts - all for June in the New York morning session.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.