The BOC is expected to cut rates by at least 25bps at its March meeting.
The BOC's rate decision comes amid hints of a coordinated G7 policymaker response to the COVID19 outbreak, in order to cushion the impact on the global economy.
As a result, the market is heavily priced for a rate cut, with money markets implying that a 25bps lowering of the rate is a dead certainty; and it might not end there, given that the market is set up for 75bps (three rate cuts) worth of easing through the end of the year.
Markets are already priced heavily for BOC easing in the months ahead - some even think that the March meeting could see a 50bp rate cut given the BOC has room compared to many other major central banks (although that is not the base case).
With that said, ING's analysts argue that, despite hardly coming as a shock, markets may well not be entirely positioned for a cut at this week's meeting, and therefore is expecting a short-term negative impact on the CAD.
"The OPEC+ meeting will be another key challenge for CAD this week given markets high expectations in terms of production cuts. Jobs data will also be watched on Friday, with the bar set quite high after the very strong January numbers... all this suggests that the headaches for the loonie in the short-term are far from over, although USD/CAD may fail to rally significantly more thanks to an underperforming USD as Fed easing expectations rise".
The volatility risk for this event is 85%.