The Bank of Canada (BoC) seems to be prepared to raise the policy rate further. In that case, the Loonie could appreciate, albeit just moderately, economists at Commerzbank report.

Will the BoC have to backpaddle?

“After the labor market data surprised clearly to the upside last Friday the question increasingly arises whether the BoC might have to adjust its rates once again after all. The BoC had left the door open for such a step in view of the high uncertainty.”

“If future data publications were to point towards further monetary policy tightening being required by the BoC imminently, CAD might benefit moderately. In view of the US central bank’s hawkish approach, we consider the appreciation potential of the Loonie against the greenback to be limited though.”