Forex

Canadian Dollar at Five-Week High as Bank of Canada, ECB and Bank of Japan Decisions Line Up

The loonie rose about 1% last week to a five-week high ahead of a Bank of Canada decision on Oct. 28 that most economists expect to bring a hike, while the ECB and BOJ are expected to hold.

Oct 25, 2026 - 12:20

0 2

Three major central banks outside the United States announce policy decisions in the coming days, and currency markets enter the week with the Canadian dollar at a five-week high and the Japanese yen coming off its best week in more than a month. The Bank of Canada decides on Wednesday, October 28, 2026, the European Central Bank on Thursday, October 29, and the Bank of Japan on Friday, October 30.

Loonie strengthens ahead of a possible Canadian hike

The Canadian dollar strengthened to a five-week high against its U.S. counterpart on Friday, trading 0.1% higher at 1.40 per U.S. dollar, or 71.43 U.S. cents, after touching 1.3969, its strongest intraday level since September 16, Reuters reported. The currency was up 1% for the week, heading for its biggest weekly gain since April, and was on track for a seventh straight daily gain. Higher oil prices, one of Canada's major exports, and domestic retail sales data supported the currency, the agency said. Canadian retail sales rose 1.2% in August, and a preliminary estimate showed a 0.7% increase in September.

Nineteen of 34 economists in a Reuters poll conducted October 21-23 said the Bank of Canada will raise its overnight rate by a quarter percentage point to 2.50%, its first move in a year, a reversal from the previous poll, in which 80% expected a hold at 2.25% through the end of 2026, Reuters reported. Investors saw a roughly 80% chance of a hike, according to Reuters. Canadian inflation rose to 3.1% in September, slightly above the central bank's 1% to 3% target range, and Governor Tiff Macklem said the bank's quarterly inflation forecasts were likely to be revised higher.

The Bank of Canada will publish its rate announcement and Monetary Policy Report at 9:45 a.m. ET on Wednesday. Among major central banks, only the BoC and the Bank of England, which is widely expected to raise rates at its early November meeting, have not yet begun to raise rates, according to Reuters.

ECB expected to pause, with December in focus

The ECB is widely expected to leave its key deposit rate unchanged at 2.5% after raising rates in June and September, according to a Reuters preview. Economists polled by Reuters expect a quarter-point hike in December, and traders saw a 66% chance of a December move, according to a Reuters currency report published by CNBC. Reuters noted that French 10-year borrowing costs had risen above 5% to 24-year highs and that the premium on French 10-year bonds over German debt stood at 170 basis points, compared with 92 basis points when the ECB met in September.

The euro was last down 0.12% at $1.12 on Friday and was set to finish the week 0.35% lower, while it touched 175.08 yen, its lowest against the Japanese currency since October 2025, the CNBC report said.

Bank of Japan meets as inflation tops target

The Bank of Japan's next policy meeting runs October 29-30, and it will release its statement and quarterly Outlook for Economic Activity and Prices on October 30, according to the BOJ's release schedule. The policy rate stands at 1.25% after a September increase. In a Reuters poll conducted October 13-19, 54 of 78 economists expected a hike to 1.5% this quarter, and of the 54 respondents who specified a month, about 80% chose December, with only 2% picking the October meeting, Reuters reported. Two board members opposed September's increase, the poll report noted.

Japan's annual core consumer inflation exceeded the BOJ's 2% target in September for the first time in nine months, according to the Reuters report published by CNBC, and traders were pricing in 59% odds of a December BOJ hike. The yen strengthened 0.18% to 156.45 per dollar on Friday and was on track for a weekly gain of around 0.9%, its best week since early September, supported by safe-haven demand after Thursday's selloff in artificial-intelligence stocks. The dollar index rose 0.13% to 101.70 on the day and was headed for a weekly loss of 0.10%.