Bank of Canada (BoC) raised interest rates by 1.00% or 100 bps (basis points), taking them 1.50% to 2.50%, beating expectations of a 0.75% hike. is generally expected to hike its key rate by a further 75 bps. Although, the CAD hasn’t benefited from such staggering moves and today it is not taking advantage either, unlike the USD which has been surging on 75 bps hikes from the FED.

BOC is slated to hike rates by 75 bps to 3.25% today but it’s not a sure thing as 50 bps or 100 bps are on the table as well, such as last time when they surprised markets. Unlike the Fed, the BOC isn’t afraid of surprising markets and communication has been vague.

USD/CAD H1 Chart – The Bullish Trend Continues

Moving averages acting as support during retreats lower

In the opinion of economists at Commerzbank. “It will yet have to become clear whether the BoC’s plan of a soft landing will work out and whether it will avoid the risk of a wage-price spiral. If inflation expectations consolidate at higher levels higher rate hikes would probably be required to weaken price pressure – which would make more pronounced effects on the economy more likely.”

Although it all depends on how hawkish the statement from the BOC will be and whether it contains signals for further rate hikes. if they pledge to keep this pace of hikes, then the CAD will probably take some advantage and USD/CAD might retreat lower, if not, chances are that buyers will remain in charge.

The USD is solid as the only remaining safe haven, with the risk sentiment being negative due to the global economy heading into a recession, central banks raising rates pretty fast and China still applying lockdowns. Besides that, WTI crude Oil is bearish and it is making new lows at $83.50 as I write, which will also be weighing on the CAD, since Oil is the main export of Canada.

USD/CAD Live Chart