On Wednesday (October 28), the US dollar was virtually unchanged against the Canadian dollar during the US trading session. Despite the Bank of Canada raising interest rates as expected, the Canadian dollar failed to benefit. The pair traded around 1.4050 during the session; the price fluctuated wildly in both directions immediately after the decision was announced. The Bank of Canada raised its policy rate by 25 basis points to 2.50%. The Bank of Canada's Board of Governors stated that the rate hike was necessary to "reduce the risk of persistently high energy prices spreading to other goods and services." The central bank also left room for further rate hikes: "We do not rule out the need for another increase in the policy rate, but given various uncertainties, the Board agreed to proceed cautiously." The Bank of Canada emphasized that "it will remain committed to its mission of maintaining Canadians' confidence in price stability." At the press conference following the decision, Bank of Canada Governor Tiff Macklem stated that "the rate hike can limit the price transmission effect of high oil prices," while acknowledging that inflation "does not appear likely to be effectively controlled." Macklem pointed out that "even after this rate hike, the current policy rate level is still too low and insufficient to curb economic growth." However, he also stressed that "there is no predetermined path for interest rate adjustments" and warned that "uncertainties in the US trade situation and the Middle East situation could alter the course of events." Updated economic forecasts indicate that Canada's return to its 2% inflation target will take longer. The Bank of Canada expects consumer price index (CPI) inflation to climb to about 3.5% by the end of the year, with an average inflation rate of 3% in 2027—an upward revision of 1 percentage point from its July forecast; inflation is not expected to fall back to the 2% target level until mid-2028. (USD/CAD Daily Chart Source: FX678) The market will now focus on the Federal Reserve's monetary policy decision, to be announced at 02:00 Beijing time. The US dollar remained strong ahead of the decision, with the Dollar Index (DXY) hovering near a two-week high of 102.40. The market widely expects the Fed to maintain its interest rate range of 3.75%–4.00% after the 25 basis point rate hike in September. Upside risks to inflation remain prominent, and traders will closely watch Chairman Warsh's speech for clues about a potential December rate hike. According to the CME FedWatch Tool, the market currently sees an 85% probability of a December rate hike. If the Fed releases a hawkish signal of holding rates steady, it will benefit the dollar and push the USD/CAD pair higher; conversely, if the statement is less hawkish than expected, traders may lower their expectations for a December rate hike, thus putting downward pressure on the dollar.