© Reuters.
Investing.com – It fell on Tuesday, with only a day left until the Bank of Canada is expected to make a second consecutive offer after a surprise rally last month.
USD/CAD fell 0.20% to 1.3253.
The Bank of Canada is expected to raise interest rates by 0.25% to 5% on Wednesday after resuming rate hikes last month after a five-month hiatus.
About 70% of traders expect the Bank to raise interest rates on Wednesday.
The expected increase comes as some suggest the decision not to raise will revive bets on rate cuts and lead to an easing of financial conditions, undoing the Bank of Canada’s work thus far and putting it in an uncomfortable position for months until its next rate decision in September.
“Failure to raise rates this coming week when the hike is mostly priced in, would risk inviting renewed easing of financial conditions… and be taken as a signal that the Bank of Canada is vacillating again,” Scotiabank Economics said in a note.
The policy decision will be accompanied by a new set of economic forecasts, including an inflation update and growth updates.
The latest inflation showed a slowdown to 3.4% in May from a year earlier, down from 4.4% in April, marking the lowest rate of inflation in two years.
The central bank previously expected inflation to slow to around 3% in the middle of this year, and drop to its target of 2% in 2024.