USD/CAD has broken below 1.28. In Canada, today's CPI should endorse more hikes, which are set to underpin the loonie, economists at ING report.

Inflation data unlikely to affect BoC policy expectations

“The market is expecting some signs that the headline rate has peaked (at 6.7% YoY), which would imply a monthly increase of 0.5% in April. Core measures may however continue to inch marginally higher. Barring major surprises in the data today, we suspect that the impact on the Bank of Canada's rate expectations and on the Canadian dollar will be limited.”

“USD/CAD should continue to weaken if we see further signs of stability in global sentiment today.”

“Crucially, the rate and growth differential that may curb EUR/USD don't apply to CAD vs USD given a hawkish BoC and strong growth in Canada, which means that a rally in the loonie should prove more sustainable than the EUR/USD one.”

“We continue to target sub-1.25 levels in USD/CAD by the second half of the year.”