In the survey conducted from July 16th to 19th, nearly three-quarters of the surveyed economists (22 out of 30) predicted that the Bank of Canada would cut interest rates by 25 basis points this week, bringing the rate down to 4.50%, and expected inflation to continue to decline.

The interviewed economists also expect the Bank of Canada to pause its easing cycle at its September meeting and then resume interest rate cuts in October and December. This means that the Bank of Canada will cut interest rates twice before the Federal Reserve begins its easing cycle. Currently, the market generally expects the Federal Reserve to begin its easing cycle in September.

Andrew Kelvin, Head of Canada and Global Interest Rate Strategy at TD Securities, stated that Q2 CPI inflation is "tracking below the level predicted by the Bank of Canada in April, and the business outlook survey is extremely mild... The conditions for the Bank of Canada to cut interest rates again at its next meeting are already in place

Tony Stillo, the head of Canadian economics at Oxford Economics, said, "The Bank of Canada has made it clear that it only intends to gradually ease policy. We believe that in the short term, the central bank will still focus more on upward inflation risks rather than downward risks. If inflation does not slow down as we expect, the Bank of Canada may postpone further policy easing and maintain higher policy rates for a longer period of time

At the same time, Canada's inflation has eased more than expected, increasing expectations of a rate cut in July. Even worse, Canada's retail sales for May, announced last Friday, were dismal and far below expectations. This clearly indicates that the economy is collapsing due to high interest rates. Therefore, the Bank of Canada has every reason to cut interest rates.

Foreign exchange analyst Saqib Iqbal pointed out that from a technical perspective, the US dollar against the Canadian dollar is trading above the 22 day moving average, and the relative strength index has risen above 50, indicating that the bulls are under control.

The USD/CAD has remained within the range between the support level of 1.3600 and the resistance level of 1.3750. Therefore, the exchange rate must break through this region in order to show the next trend. Due to bullish dominance, the exchange rate may challenge the range resistance level. Breaking through this level will bring the price back to the critical level of 1.3900. However, if it fails to break through, the US dollar may continue to consolidate against the Canadian dollar.

Daily chart of USD/CAD exchange rate