MUFG Research discusses its expectations for today's BoC policy decision.

"The BoC faces a difficult balancing act. On the one hand it has to acknowledge stronger than expected growth but it is unlikely to want to encourage expectations that is planning to bring forward tightening plans at the current juncture which would reinforce the move higher in yields and the Canadian dollar," MUFG notes. 

"Market participants will be watching closely to see if the BoC announces any further plans to slow the pace of QE, although the timing does not appear to be ideal given the recent sell off in the bond market. We expect the BoC to stick to their plans not to begin raising rates until 2023 at the earliest. Overall, we don’t expect the developments to materially alter the bullish trend for the Canadian dollar and have recently recommended a short EUR/CAD trade idea," MUFG adds.