The Canadian Dollar has been the best G10-performing currency in the past month. Economists at ING analyze CAD outlook ahead of the Bank of Canada meeting.

A hawkish hold from the BoC

We favour a hawkish hold, signalling that if there isn’t clearer evidence of softening in price pressures it could raise rates again in July.

A hawkish tone by the Bank of Canada at the June meeting is clearly an important element to keep the bullish narrative for CAD alive.

As long as the BoC does not push back against the pricing for a hike in the summer, we expect CAD to remain supported. 

Some lingering USD strength in June can put a floor around 1.33/1.34 in USD/CAD, but we expect a decisive move to 1.30 in the third quarter and below then level before the end of the year.

See – BoC Preview: Forecasts from six major banks, rates unchanged but hawkish bias