Canada’s central bank maintained its interest rate at 2.25%, aligning with market expectations. Gold prices held steady as investors anticipated a dovish Federal Reserve decision.
The EUR/USD pair climbed, nearing 1.1670, while GBP/USD recovered to 1.3240. Additionally, gold prices retracted from highs, settling around $4,000. Expectations increased for a rate cut from the Federal Reserve amidst an unclear economic outlook.
Bank Of Canada Interest Rate Decision
The Bank of Canada indicated an end to rate cuts amid trade concerns, influencing the EUR/CAD. Meanwhile, the GBP/USD fell below the 200-day SMA due to UK data and Bank of England rate cut chances.
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Federal Reserve Rate Cut Speculation
As of today, October 29th, 2025, we are positioned for a significant Federal Reserve rate cut in the coming days. The market is acting as if this is a done deal, with federal funds futures indicating a greater than 90% probability of at least a 25-basis-point reduction. This move is complicated by a government shutdown, which means the Fed is making its decision without the latest employment or inflation data.
The Bank of Canada’s decision to hold its interest rate at 2.25% creates a clear divergence trade against the US dollar. While the Fed is expected to ease policy, the BoC has explicitly signaled an end to its cutting cycle, citing concerns over tariffs. With Canada’s core inflation recently holding firm around 2.8%, the Canadian dollar appears strong against a weakening US dollar outlook.
Gold is trading steadily near the $4,000 per ounce mark, a level that reflects broad anticipation of lower interest rates and a softer dollar. We have seen this kind of price action before, particularly during the economic uncertainty and inflationary period of 2024. Derivative traders should watch for a potential breakout above this psychological level if the Fed signals a more aggressive easing cycle than currently expected.
Meanwhile, the British pound is struggling, having dipped below its 200-day moving average. Weak domestic data, including a recent UK retail sales report that showed a surprise 0.5% contraction, has heightened speculation that the Bank of England will follow the Fed in cutting rates. This makes the pound particularly vulnerable against the euro and other currencies whose central banks are not as dovish.
We must also note the rising price of WTI crude oil, which is climbing after a sharp inventory decline reported by the EIA last week. The nearly 5 million barrel drawdown suggests strong demand, creating an inflationary pressure that runs contrary to the economic slowing narrative driving rate cuts. This tension between slowing growth and rising energy costs could create volatility in commodity-linked assets.
