The Bank of Canada announced on Wednesday, June 11th, that it would keep its benchmark interest rate unchanged at 2.25%, aligning with widespread market expectations.
This marks the fifth consecutive time the Canadian central bank has opted to hold rates steady.
However, in a rare warning issued alongside the rate decision announcement, Governor Tiff Macklem cautioned that if the ongoing Middle East situation continues to drive up energy prices and subsequently fuels broader inflation, Canada may need to implement consecutive interest rate hikes in the future.
The Bank of Canada stated in its announcement that while current economic growth is weak, inflationary pressures remain tilted to the upside.
Particularly, uncertainties surrounding US trade policy and the oil price surge triggered by the Iran conflict are creating a difficult dilemma for monetary policy.
Governor Macklem commented in his speech: "The simultaneous occurrence of economic weakness and rising inflation presents a conundrum for monetary policy.
Raising interest rates helps curb inflation but could further weigh on the economy; lowering rates supports economic growth but also increases the risk of persistent high inflation."
He stated that maintaining the current interest rate is the optimal choice to balance these two risks at present.
Furthermore, markets had been anticipating Federal Reserve rate cuts for most of 2026, with Goldman Sachs previously forecasting cuts in December 2026 and March 2027.
However, following the release of the May employment report on June 6th, which significantly exceeded all economists' expectations, Goldman Sachs completely removed these two dates from its forecast timeline.
The latest message from this investment bank is very straightforward: no rate cuts this year, and the probability that the Fed's next move is not a cut has increased significantly.
Goldman Sachs Chief US Economist David Mericle, in the latest report, rescinded the bank's prior two 2026 rate cut predictions, replacing them with a forecast for 25-basis-point cuts in June and December 2027.
Key data to watch today includes the US Initial Jobless Claims for the week ending June 6th and the US Producer Price Index (PPI) year-over-year for May.
Additionally, the European Central Bank's interest rate decision scheduled for the evening warrants close attention.
Gold/US Dollar
Gold experienced a significant decline yesterday, retreating below the 4100 mark and refreshing a seven-month low, with the current spot price trading around 4095.
The resurgence of Middle East tensions, which heightened market risk aversion, was the primary factor pressuring gold lower.
Additionally, the better-than-expected US CPI data released during the period, which fueled expectations for Federal Reserve rate hikes, was also a significant factor weighing on gold.
Today, focus will be on resistance around the 4150 level, with support situated near 4050.
US Dollar/Japanese Yen
The US Dollar/Japanese Yen pair moved higher yesterday, refreshing a six-week high, with the current spot price trading around 160.50.
The US dollar index's rise, supported by safe-haven demand spurred by renewed Middle East tensions and strong economic data that boosted Fed rate hike expectations, was the main driver behind the pair's ascent.
However, expectations for potential Bank of Japan rate hikes and concerns about renewed Japanese intervention in the currency market limited the pair's upside.
Today, focus will be on resistance around 161.50, with support near 159.50.
US Dollar/Canadian Dollar
The US Dollar/Canadian Dollar pair edged lower yesterday, closing slightly down for the day, with the current spot price trading around 1.3940.
Profit-taking exerted some downward pressure on the pair, while rising crude oil prices supported by the rekindling of Middle East tensions were also a significant factor weighing on the pair.
Nevertheless, the strong US CPI data and the associated increase in Fed rate hike expectations limited the pair's downside.
Today, focus will be on resistance around 1.4050, with support near 1.3850.
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