A few weeks ago, traders were betting the Bank of Canada would keep raising rates. Now they're betting it won't have to.
That shift just flipped the script on the Canadian dollar, and three of the biggest banks on Wall Street are leaning into the trade.
April's Canadian inflation came in softer across the board, with headline prices rising 2.8% from a year earlier, below the 3.1% economists expected.
Two key core measures cooled too. Median core ran at 2.1%, and trim core slid to 2.0%, both below forecasts.
Those are inflation gauges the central bank watches closely to filter out noisy items like food and energy. When they cool faster than expected, it weakens the case for higher rates.
Markets cut the odds of a Bank of Canada hike by July to 24%, down sharply from where they sat just a few weeks ago, according to softer-than-expected CPI data.
We break down the moves big money is actually making in Market Briefs, in five minutes a day, plus a free investing masterclass when you sign up.
Deutsche Bank, JPMorgan, and Nomura have turned bearish on the Canadian dollar for the rest of 2026. When rates are expected to fall (or stop rising), the currency tied to those rates often weakens with them.
The reason is simple. Investors get paid less to hold that currency, so they go shopping elsewhere.
Deutsche and JPMorgan got more specific with their calls. They told clients to sell the Canadian dollar against the Australian dollar and the Mexican peso.
Why those two? Australia's central bank is still leaning hawkish, and the Mexican peso sits on a wider interest rate gap with Canada, which makes both currencies more attractive homes for yield-hungry money.
The Bank of Canada's next rate decision is the one to track, especially if officials hint at easier policy ahead, which would add fuel to the bears.
Watch the next inflation print too, because if it cools again, the rate hike bet keeps fading and Canadian dollar shorts pile up faster.
Currency moves don't show up in a portfolio the way stocks do, but they shape everything tied to Canada, from oil exports to the cost of your next trip to Toronto.
Three of the most respected desks on Wall Street just lined up on the same side of the same trade.
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