Bank of America Global Research previews the July BoC decision due on Wednesday.

"We expect the BoC to stay on hold at 2.25% on July 15 and through year-end. Activity appears to be recovering after the technical recession at the turn of the year, but underlying conditions remain soft and growth is likely to stay below potential through the rest of 2026. Some of the recent improvement may also reflect a temporary FIFA World Cup boost. With core inflation close to target and long-term inflation expectations well anchored, we see little reason for the BoC to tighten further this year," BofA notes.

"The expectation for a Bank of Canada on hold is in line with our FX view that USD-CAD should drift modestly higher over the medium-term. We recently revised upward our USD-CAD forecasts, along with our broader revisions for a relatively stronger USD in G10 near-term. We hold an expectation in H2 that USD-CAD should be in the low-to-mid 1.40's type range, with an end-year forecast of 1.43. Recent developments around Iran and oil prices have had more of a mixed impact on CAD as of late," BofA adds.