The Canadian dollar declined after the Bank of Canada hiked rates, as expected, but also signaled a shift to the sidelines.

"If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases," the BOC statement said.

That comment boosted USD/CAD to 1.3407 from 1.3350 before the decision. It was part of a broad softening in the Canadian dollar.

USDCAD 15 min chart

The Bank of Canada decision also reverberated beyond Canadian markets with a broad bid in global fixed income emerging after the announcement, likely on the idea that other central banks will also pause the rate hiking cycle or pause sooner than previously anticipated.

For Canada, a pause elsewhere could ultimately be bullish if it helps lead to a soft landing and sets up better global growth in 2024 and beyond.