Bank of Canada May Temper Hawkishness This Week, Leaving Room for Loonie Upside, Corpay Says

09:19 AM EDT, 09/01/2026 (MT Newswires) -- The Bank of Canada may have little choice but to dial back its recent hawkish stance at Wednesday's rate decision, as the renewed breakdown in tariff talks with the United States has significantly heightened policy uncertainty, according to Corpay. "Traders are bracing for a dovish message from the Bank of Canada in tomorrow's rate decision. This is not necessarily a reflection of negative fundamentals," wrote Corpay Chief Market Strategist Karl Schamotta in a Tuesday note. The mid-August breakdown in tariff negotiations between Canada and the United States has raised concerns over weaker trade, potential job losses, and a slowdown in economic activity. Against this backdrop, BoC policymakers are likely to adopt a more cautious tone on inflation while emphasizing downside risks to the economic outlook, added Schamotta. A dovish message doesn't necessarily spell downside for the Canadian dollar, according to Corpay. With markets already positioned for a softer tone, much of the impact may already be priced in, leaving the loonie vulnerable to any unexpected shifts in the BoC's communication. These developments could offer some upside for the Canadian dollar, said Corpay. The loonie has remained notably steady this year, trading in a considerably narrower range than during previous episodes of market stress.