USD/CAD losses checked near 1.35 ahead of the Bank of Canada (BoC) policy decision. Economists at Scotiabank expect the pair to drop below the 1.35 mark on a hawkish hike.

A dovish hike will drive USD/CAD back towards 1.38/1.39

“Assuming a 75 bps increase, a dovish hike – that is, 75 bps with guidance towards slower/limited hikes moving ahead and the rate cycle near its peak – will hurt the CAD and drive spot back towards 1.38/1.39.”

“A neutral hike – 75 bps with little or no guidance – likely keeps USD/CAD in its current range.” 

“A hawkish hike – 75 bps and clear indications from the statement that there is a lot more work to do to curb inflation – should see spot edge under 1.35.”

See – BoC Preview: Forecasts from 10 major banks, taking what is offered, a 75 bps hike