The Bank of Canada (BoC) will announce its Monetary Policy Decision today. Economists at ING expect a limited impact on the Canadian dollar, with a possible spike in the USD/CAD pair to the 1.31-1.33 area.

75 bps hike by the BoC 

“We expect a 75 bps rate hike, in line with what is now widely expected to be the next Fed move.”

“Given the still good economic backdrop – a correction in employment figures last week did not dent the notion of a tight labour market – and the fastest inflation rate in three decades, we see no reason for the BoC to scale down the hawkishness of its policy message today.”

“We believe that two more 50 bps rate hikes in September and October, followed by 25 bps in December are warranted. As today’s policy message by the BoC may not dent such rate expectations, we believe the overall impact on CAD should be rather limited or – if anything – slightly positive.”

“Spikes to the 1.31-1.33 area in the near term are possible in USD/CAD, but we still expect sub-1.25 levels by year-end.”

See: BoC Preview: Forecasts from nine major banks, hiking interest rates aggressively