(Bloomberg) -- The Canadian dollar is falling under pressure as the Bank of Canada’s expected decision to keep its key policy rate steady contrasts with the Federal Reserve’s aggressive fight against inflation. 

The loonie fell as much as 0.4% to 1.3815 against the greenback, the lowest since October, as Canada’s monetary authority left interest rates unchanged for the first time in nine meetings. Policymakers led by Governor Tiff Macklem said they’re still weighing whether additional hikes will be needed to rein in inflation. 

That comes in sharp contrast to this week’s remarks from Fed Chair Jerome Powell, who reiterated a commitment to even-tighter US monetary policy if economic data stays hot. The comments have spurred traders to bet on a 50-basis-point hike in March and higher peak rate later in the year.

Canada’s dollar is on track for a fifth-straight day of losses Wednesday, underperforming all of its Group-of-10 peers versus the greenback. 

Investors and strategists are now looking ahead to US labor-market data due Friday for clues on the Fed’s next moves. The world’s top economy will also report inflation next week before the Fed’s rates decision on March 22.

Here’s what analysts are saying:

Jay Zhao-Murray, a currency analyst at Monex Canada in Toronto

  • “For us to get to 1.40 on USD/CAD, we would need a strong US jobs report on Friday and confirmation from CPI on Tuesday. Without these, I don’t expect us to touch that level.”
  • “Currently, USD/CAD spot prices are a bit stronger than our one-month forecast, but this is largely due to the impact of Chair Powell’s comments that the Fed could re-accelerate the pace of hiking and the corresponding increase in US rates. For this reason, the near-term risks to our tactical forecasts skew to the upside.”

Bipan Rai, a currency strategist at Canadian Imperial Bank of Commerce

  • “Ahead of non-farms on Friday, we think USD/CAD will be sticky around the 1.38 area. We’ll reassess based on what nonfarms tells us”
  • The bank turns “a bit more bearish in the near-term” on the loonie

Mark McCormick, head of FX strategy at Toronto Dominion Bank

  • Much of the Canadian dollar moves hinges on US data over the next week, mostly inflation; “Benign US inflation and market shifts back to 25bp Fed hike this month and CAD will recover a bit”
  • The bank prefers short loonie exposure to crosses like the Australian dollar
  • “We like AUD/CAD higher here, focusing on the growth pivot to Asia relative to North America. That’s my highest conviction in the short-term, thinking through the next month”

Fawad Razaqzada, market analyst at City Index and Forex.com

  • USD/CAD could be heading to 1.40 as the Bank of Canada pauses rate hikes
  • US employment sector continues to show strength, with JOLTS Job Openings data coming in above expectations and “providing fresh ammunition for the greenback after Powell’s hawkish message on Tuesday”

Erik Nelson, macro strategist at Wells Fargo

  • “The BOC is probably done hiking at this point. That should keep downward pressure on CAD broadly versus other G10 currencies”
  • The Canadian dollar would unlikely to weaken past C$1.40
    • “If the Fed hikes rates by 50 bps next week and guides for more 50-bp increases going forward,” that could push USD/CAD further past 1.40

Tony Stillo, director of Canada economics at Oxford Economics

  • “Aggressive rate increases by the Fed might put pressure on BOC to also raise rates. But we expect the BOC will likely remain on hold unless the Fed funds rate moves to the 5.5% range – pushing the spread to 100bps – and forcing the BOC to hike rates to avoid a much weaker CAD and higher import prices”

(Updates pricing throughout.)

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