Earlier previews:

Preview remarks (in brief) via ING:

  • We look for the Bank of Canada to raise interest rates 25bp on 26 Jan. Activity is strong, the economy is seeing record employment and inflation is at 30-year highs. Covid containment measures are also set to be eased at the end of the month and this should signal the green light to hike rates. Expect a positive impact on CAD, although extenal risks are mounting

The report highlights:

  • Strong economic recovery boosts the case for action
  • Inflation and easing restrictions gives BOC the green light

On CAD implications:

  • Rate hike to support CAD, but watch for external risks
  • Markets are currently pricing in around a 70% implied probability that the BoC will hike rates on Wednesday. This means that there is some decent room for Canada's dollar to benefit from a rate hike, as this would also legitimise the current aggressive tightening expectations by the markets, which are pricing in around 125bp worth of hikes in 2022
Bank of Canada