Economists at Commerzbank analyze how the Bank of Canada (BoC) Interest Rate Decision could impact the Loonie (CAD).

A surprise rate hike is likely to boost the CAD further

A vote for an unchanged 4.5% rate today, accompanied by a hawkish statement, should provide only limited support for the Loonie. It is true that the market should feel vindicated in its assessment that the BoC will continue its rate hike cycle in July. However, this seems to be already priced into the market. In addition, the market is likely to keep an eye on the upcoming central bank decisions by the Fed and the ECB next week and position itself rather cautiously. 

On the other hand, a surprise rate hike as early as today is likely to boost the CAD further.