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Bank of Canada Is in "No Hurry" to Move, Says UBS

BY MT Newswires | ECONOMIC | 08:31 AM EDT

08:31 AM EDT, 06/05/2026 (MT Newswires) -- Canadian inflation readings for April have come in below market expectations, while the USMCA trade deal negotiations deadline of July 1 is approaching fast, said UBS.

This follows a period of generally weaker economic data from Canada, as evidenced by a sharp decline in economic surprise indexes, writes the bank in a note to clients.

Against this backdrop, UBS expects the Bank of Canada to keep rates on hold at 2.25% at Wednesday's policy meeting.

Although markets see some potential for a hike later in the year, the bank doesn't believe this is very likely. While inflation may pick up further, the underlying inflationary backdrop -- reflected in core inflation indexes -- should remain well contained.

In addition, trade negotiations between Canada and the United States carry the risk of becoming "contentious." With trade uncertainty remaining elevated, UBS predicts the Canadian dollar (CAD or loonie) to face headwinds in the near term.

The bank points out it wouldn't be surprised to see USD/CAD initially trade in a 1.40-1.42 range before stabilizing and eventually retreating toward 1.35.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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