Canadian Dollar May Rise on Possible Bank of Canada Rate Hike Next Week, UBS Says

08:13 AM EDT, 10/23/2026 (MT Newswires) -- The Canadian dollar could gain ground next week as the Bank of Canada is expected to raise rates by 25 basis points and signal further concerns about inflation, according to UBS Investment Research in a note. Recent hawkish remarks from BoC Governor Tiff Macklem have helped push USD/CAD lower to around CA$1.40 from almost CA$1.43, with markets anticipating a further 100bps of monetary tightening, wrote UBS in the Thursday note released to media on Friday. Canada's central bank is slated to release its policy decision on Wednesday. A 25bps rate hike paired with hawkish guidance could drive USD/CAD below CA$1.40, allowing the Canadian dollar to extend its near-term gains, said the bank. However, the medium-term outlook remains unclear, as markets may be anticipating more BoC rate hikes than the weak Canadian labor market can justify, added UBS. This could limit further gains in the loonie, especially if the US Federal Reserve proceeds with three additional rate increases.