The Canadian Dollar (CAD) is holding close to Tuesday’s closing level ahead of the Bank of Canada policy decision. The Bank is widely expected to cut its Overnight rate 25bps to 4.25%. This is a policy statement (9.45ET)/press conference (10.30ET) meeting, with the next MPR update due on October 23rd, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

A push above 1.3575 to push USD even higher

“The easing cycle has some way to go yet in all likelihood so policymakers are likely to sound dovish. Markets are pricing in sequential cuts from the BoC over the remainder of the year so dovishness may help keep the CAD tone corrective after its recent rebound but is unlikely to drive it significantly lower. Assuming no surprises today, attention may shift quickly back to the USD and the Fed outlook.”

“USD/CAD’s estimate fair value sits at 1.3616 today, suggesting some modest upside risk for the USD, all else equal. Governor Macklem has a busy September ahead of him. Speeches are scheduled for September 10th, 20th and 24th. Corrective USD gains have stalled about where I expected them too, at least for now. Intraday price action is neutral and leaning bearish for the USD at this point, with spot gains finding a little more resistance in the mid/upper 1.35 area.”