Ella 
The Canadian dollar has tracked the dollar’s weakness over the past week, losing ground against most of the G10 currencies. Economists at ING analyzed the outlook for the Canadian dollar ahead of Wednesday’s Bank of Canada meeting.
With the market not fully pricing in a July rate hike by the Bank of Canada (as of Friday, the implied probability was around 70%), we could see renewed CAD strength within the week, especially since the Bank of Canada may be adding to the rate hike. A very dovish tone has little interest and is likely to remain open to more tightening in the future.
In an environment of rising US yields and hawkish Fed communications, the dollar’s recent weakness appears unsustainable, so we don’t see significant downside potential for USD/CAD just yet. Conversely, if our view of a BoC rate hike turns out to be correct, we favor some performance by the CAD against other high-beta commodity currencies such as AUD and NZD.
