1. The BoC is expected to announce its decision on the interest rate tomorrow, at 14:00 (GMT).
2. BoC is expected to remain on hold and keep interest rates at +1.25%.
3. Market is currently pricing in the probability of retaining the current interest rate by 74.47%, according CAD Overnight Index Swaps while a probability is implied for the bank to raise interest rates by 25 bp by 25.53%.

Comment by IronFX Experts

We currently share the view that most likely the bank will remain on hold as despite the fact that the inflation rate (+2.2%yoy), currently is within the bank’s range (2.00% ±1.00%), it could be the case that the bank will retain a more cautious tone and maybe tolerate the current inflation rate as it may be watching out for the uncertainty of the NAFTA negotiations, the high private debt level and the unemployment rate (5.8%).

Overall as the rate is forecasted to remain unchanged we could see the market’s attention turning to the accompanying statement.

We see the case once more for a balanced tone, however we see risks skewed to the dovish side for this meeting and accompanying statement.

It could be the case though, that the bank may surprise us in the second half of the year with two rate hikes with marginal chances existing in the December meeting for a second rate hike.

In general, we see the case for the CAD weakening somewhat from the current interest rate decision.