The Canadian dollar was initially down today following the US Federal Reserve’s statement on interest rate cuts.

Wednesday’s dovish news that there would be no US interest rate cuts for March has affected the Canadian dollar (CAD). The CAD/USD pairing was down since the announcement, but it had started to improve by Thursday afternoon.

The price shot up from $0.7429 (CAD/USD) to $0.7474 over the course of about five hours. This is one of the steepest climbs we have seen for this pairing all month, and it indicates that the initial Fed rate fears are finished and the market is recovering from the announcement. Much of the decline we saw for the Canadian dollar throughout the week has now disappeared, and the Canadian unit is strengthening against is counterpart.

Will the Canadian Dollar Keep Going Strong?

The CAD unit is held back by economic factors right now. The Bank of Canada interest rate increases that started in 2022 are still hurting the dollar. The Canadian economy grew only slightly last year, with 0.2% growth in November. That didn’t spur the CAD unit much, though, since that was the first growth reported in half a year. The country’s GDP grew an estimated 1.5% as well.

These indicators point to an economy that is not vigorous but could be able to just miss a recession. The best that economists can say about Canada’s economy right now is that it has shown something of a turnaround, which is neither damning or overly positive.

Even with an uptick in the CAD’s stand against the US dollar, these economic factors will hold back CAD and keep it from staying consistently strong. The Bank of Canada is not cutting interest rates either, in a move to protect the economy from inflation. That seems to be the trend among government banking institutions right now in order to help avoid anything that could push the countries closer to recession.