Bank of Canada Still Set to Lean Dovish

The Bank of Canada is expected to remain dovish and hold rates at 2.25% through early 2027, given Canada's technical recession and trade policy risks. Consequently, the Canadian dollar is expected to lag peers.

Key Takeaways

• 1.The Bank of Canada is expected to maintain a dovish stance at its June 10 meeting due to weak economic activity, technical recession, and USMCA trade risks.
• 2.ING anticipates interest rates will remain unchanged at 2.25% through early 2027.
• 3.The Canadian dollar is projected to remain a laggard among commodity currencies, with potential for USD/CAD to test 1.40 in the short term.

Table of Contents

• Bank of Canada still set to lean dovish
• Inflation and jobs data don't justify hawkish shift
• Recession and USMCA still argue for a dovish stance
• We don't expect a BoC hike
• USD/CAD upside risks persists
• Short-term rate spread adding upside pressure on USD/CAD

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