USD/CAD: Adjustment of rate expectations to the upside could support the Loonie – Commerzbank

Board members of the Bank of Canada (BoC) might have to adjust its rate hikes expectations. The Loonie could receive some support with higher peak and less rapid rate cuts, economists at Commerzbank report.

Will the market have to adjust its expectations?

“BoC will have to consider whether its rate hikes last year will be sufficient to control inflation pressure. The question that increasingly arises for the market is whether it will have to adjust its expectations for the meeting at the end of January and afterwards as it has so far seen little likelihood of significantly higher key rates and expects cuts again over the course of the year.” 

“The publication of the December inflation data next week will be important. If no improvement is seen here, it might adjust its rate expectations to the upside (higher peak and less rapid rate cuts), which could support CAD at least a little.”