USD/CAD: BoC policy decision is nigh - Scotiabank

The Canadian Dollar (CAD) is holding relatively steady against the strong USD ahead of the Bank of Canada policy decision and MPR at 9.45ET. Governor Macklem and Senior DG Rogers hold their press conference at 10.30ET, Scotiabank's Chief FX Strategist Shaun Osborne notes.

CAD holds little changed

"Markers are more or less fully priced for a 1/2 point cut in the target rate to 3.75% although pricing has shaded a little from near total conviction late last week to about 45bps of easing reflected in swaps as of late yesterday afternoon. The house call is 50bps, but without much enthusiasm or conviction. While markets are anticipating a more aggressive move, the Bank is not obligated to meet market expectations."

"If it does so, the bolder move may be accompanied by more cautious language about the path forward. There certainly are grounds for caution regardless, with the CAD soft and the US election outcome a major risk in the very near future. An aggressive move and dovish language should see spot punch through 1.3850. A 'hawkish' cut may see the CAD steady and rebound somewhat but near-term gains may be limited to the mid/upper-1.37s."

"USDCAD gains remain very stretched and spot is showing signs of steadying around the 1.3822/76.4% Fibonacci retracement of the August/September drop. But there is little sign of a turnaround in the USD at this point and--absent that--risks remain tilted towards USD strength persisting or extending through 1.3850 to retest the August peak at 1.3945/50. Support is 1.3750."