The BoC sounded restrictive, without committing to anything for the coming months, so the market assumed it might hike interest rates again should this become necessary. That means a hike is more likely as the next step rather than a pause in the cycle.

The market seems to perceive the BoC as being restrictive. It will now keep a close eye on the inflation data next Tuesday to decide whether a further rate step will become increasingly likely. If that is the case, the rise in rate hike expectations is likely to support CAD.