The Bank of Canada kept its key interest rate unchanged at 2.75% on Wednesday, citing the resilience of the Canadian economy despite the ongoing global trade war sparked by the United States.

Governor Tiff Macklem stated in pre-prepared remarks that the board’s decision was based on a “clear consensus.”

He explained that the Canadian economy has not experienced a sharp downturn despite significant trade uncertainty, and that core inflation remains relatively stable, even in the face of continued US tariffs.

This decision follows the bank’s choice to keep rates steady in both April and June, amid uncertainty stemming from global tariffs.

The move was in line with economists’ expectations ahead of the announcement.

Macklem noted that recent trade deals signed by the US with major global players such as Japan and the European Union have eased fears of a severe and escalating global trade war, and that the impact thus far has been less severe than initially feared.

Free Trade Unlikely to Return: Macklem

Although US President Donald Trump has recently signed new trade agreements, Macklem noted that these deals still include certain tariff levels.

He added that the nature of these agreements indicates the US is not reverting to a system of open free trade.

While some sectors have been heavily impacted by these tariffs, Macklem emphasized that challenges remain.

He said the Bank of Canada is closely monitoring how these tariffs affect business activity and demand for Canadian exports, and whether the higher costs from tariffs will be passed on to consumers.

The Bank of Canada cuts interest rates when it wants to stimulate the economy, but keeps borrowing costs elevated when inflation acceleration is a concern.

The central bank released its monetary policy report alongside Wednesday’s rate decision, but once again refrained from providing a single central forecast for economic performance, citing continued uncertainty.

Instead, the bank presented a baseline scenario based on current tariff levels, along with two alternative scenarios exploring the possibility of either easing or further escalation in tariffs. All three scenarios assume a continued presence of tariffs at some level.

While it remains difficult to determine the exact level of tariffs due to various exemptions and overlapping duties, the bank estimates that the effective tariff rate imposed by the US on Canada currently stands at around 7 to 8% — an increase of five percentage points since the start of the year.

Policymakers at the Bank of Canada assume that the vast majority of Canadian goods will eventually receive tariff exemptions in the coming years, thanks to compliance with the Canada–United States–Mexico Agreement, as companies accelerate efforts to obtain certification.

Under the baseline scenario, the Bank of Canada expects the economy to recover during the remainder of this year, following a 1.5% decline in seasonally adjusted annual real GDP in the previous quarter.

US stock indices rose at the start of Wednesday’s trading following the release of strong economic data, as investors also await the Federal Reserve’s policy decision.

Earnings results for Meta and Microsoft are set to be released after Wednesday’s session, with expectations of further improvement supported by continued investment in artificial intelligence.

Official data showed that real GDP in the United States grew by 3% during the second quarter, compared to a contraction of 0.5% in the first quarter. The figure also exceeded analysts’ expectations, which had pointed to growth of only 2.3%.

According to ADP data, the US private sector added 104,000 jobs in July, higher than the 64,000 expected. This compares with a revised reading for June showing a loss of around 23,000 jobs.

As for market performance, the Dow Jones Industrial Average rose by 0.1% (equivalent to 40 points) to 44,672 points by 15:48 GMT. The broader S&P 500 Index climbed 0.2% (equivalent to 14 points) to 6,384 points, while the Nasdaq Composite Index advanced 0.4% (equivalent to 91 points) to 21,190 points.

Nickel prices edged lower on Wednesday, pressured by a stronger US dollar against most major currencies and mixed forecasts surrounding the industrial metal.

UBS analysts forecast a global nickel surplus persisting through 2026, despite recent announcements of production cuts. The bank’s report noted a “significant surplus” in the market from 2022 to 2024, stating that current nickel prices already reflect weak fundamental outlooks. Analysts also see little near-term recovery in demand, citing lower stainless steel output and a diminishing likelihood of a rebound in battery-related demand.

While supply-side adjustments have made some progress toward rebalancing the market in 2024 — including 250,000 tonnes of announced production cuts and 140,000 tonnes of delayed projects — UBS believes these efforts remain insufficient. Indonesia continues to add new production capacity despite some constraints in ore availability.

Although global demand for nickel has shown resilience compared to other base metals in recent years, oversupply has forced output cuts in the stainless steel sector in both China and Indonesia. UBS projects nickel demand will grow at a solid pace of 4% to 5% annually between 2025 and 2028, down from 9% annually from 2021 to 2024.

UBS expects smaller market surpluses between 2025 and 2028, but they will remain “large enough to lead to a build-up in refined nickel inventories on the London Metal Exchange (LME).” The report notes that current LME nickel prices sit in the top 75% of the cost curve — a historically supportive level — but warns that nickel has previously traded within the cost curve for extended periods.

Second Half of 2025 Could Bring Rebound

Analysts now expect a significant price rebound for nickel in the second half of 2025 due to a tightening ore market and mine closures in Indonesia.

In mid-June 2025, the Indonesian government revoked mining licenses for several nickel mines after discovering that extraction was occurring on legally protected islands. While these four mines represented a small portion of Indonesia’s total annual output, they contained much of the country's remaining high-grade nickel ore reserves.

The declining quality of Indonesian ore — especially medium and high-grade deposits — had already begun to negatively affect Nickel Pig Iron (NPI) production even before the mining suspensions.

EU Customs Reform and Dollar Strength

Separately, EU member states agreed on a broad overhaul of the bloc’s customs system aimed at aligning with digital transformation and global trade dynamics. However, the first phase of reforms — limited to e-commerce firms — will not take effect until 2028 as part of a long-term strategy.

Meanwhile, the US Dollar Index rose 0.6% to 99.4 by 15:28 GMT, hitting a high of 99.5 and a low of 98.7.

As for commodities trading, spot nickel prices declined by less than 0.1% to $14,900 per tonne at 15:39 GMT.

Bitcoin prices edged slightly lower in Wednesday trading, extending losses for the week as traders remained largely cautious ahead of the Federal Reserve’s interest rate decision and the August 1 deadline set by President Donald Trump to impose new tariffs.

The world’s largest cryptocurrency fell 0.8% to $117,911.3 by 01:32 a.m. Eastern Time (05:32 GMT), after trading relatively flat following its mid-July rally past the $123,000 mark.

While Bitcoin remains on track for strong July gains, the recent surge has left it vulnerable to profit-taking. It also received limited support from “Strategy” (the new name for MicroStrategy, listed on Nasdaq as MSTR), despite the company announcing it had raised $2.5 billion to purchase 21,021 bitcoins.

Fed decision and tariff threats limit crypto momentum

Markets broadly adopted a wait-and-see stance ahead of the Federal Reserve’s policy decision on Wednesday. The central bank is widely expected to keep interest rates unchanged, despite mounting pressure from Trump and his allies to begin cutting rates.

Some analysts believe the Fed may hint at a less hawkish outlook, given rising concerns over the economic impact of Trump’s tariffs and signs of a cooling labor market.

Still, uncertainty around the Fed’s direction has kept traders defensive. Bitcoin posted only limited gains even after the recent trade deal between the US and the European Union.

Although the EU deal marks progress in Trump’s broader effort to restructure global trade, many major economies still face the threat of steep US tariffs starting Friday, August 1. Trump has made clear he does not intend to extend the deadline, which could trigger duties ranging from 15% to 50% on several key trading partners.

While interest rates and tariffs do not directly affect cryptocurrencies, they significantly influence overall market sentiment, which in turn impacts speculative assets.

“Strategy” raises $2.5 billion, buys 21,021 bitcoins

On Tuesday, Strategy – led by Michael Saylor – announced it had raised approximately $2.5 billion through a new issuance of preferred shares.

The company used the proceeds to acquire around 21,021 bitcoins at an average purchase price of $117,256 each, bringing its total holdings to 628,791 bitcoins.

Kraken reportedly seeks $500 million at $15 billion valuation

The Information reported Tuesday evening that cryptocurrency exchange Kraken – ranked 14th globally by daily trading volume – is aiming to raise $500 million in a funding round targeting a $15 billion valuation.

The move comes in tandem with similar efforts by other exchanges, as platforms seek to capitalize on renewed institutional interest in digital assets. This shift, alongside optimism for more crypto-friendly policies under a second Trump term, has helped fuel Bitcoin’s strong 2025 rally.

PayPal sparks crypto momentum with 400M-user payment integration

PayPal ignited another wave of excitement in the crypto market after announcing it will enable more than 400 million users to make payments with Bitcoin and over 100 other cryptocurrencies.

This isn’t just a minor app update – it could mark a turning point in Bitcoin’s evolution into a mainstream payment method, paving the way for the long-awaited goal of hitting $250,000 by 2025.

Part of the new “Pay with Crypto” initiative, the feature allows US merchants to accept crypto payments using wallets like MetaMask, Coinbase, and Kraken. It supports instant conversion of cryptocurrencies into fiat or stablecoins like PYUSD at the moment of purchase.

The system makes crypto payments seamless for businesses of all sizes, offering new models for fast settlement, low fees, and even a 4% annual yield on PYUSD balances.

With instant conversion, merchants won’t have to worry about price volatility – they’ll receive payments in dollars, while crypto-savvy consumers can pay with their coins. This removes a major obstacle to real-world crypto adoption and brings Bitcoin closer to functioning as an actual currency rather than “gold in a vault.”