Market Extra: The Bank of Canada hit the pause button on interest rate hikes. Why FX traders think the Fed will follow suit.

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The Bank of Canada, as expected, raised its key interest rate by a quarter of a percentage point Wednesday, but surprised traders as it signaled a readiness to put further hikes on pause if the economy cooperates.

The prospect of a series of aggressive interest rate increases coming to an end served to weaken the Canadian dollar versus the U.S. dollar. The interesting twist was that the U.S. dollar, in turn, weakened versus its major rivals, indicating traders may be speculating the Federal Reserve could follow suit after…

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