CAD flows: CAD modestly softer after 50bp BoC cut

The BoC have cut rates 50bps as was very nearly fully priced into the market, and USD/CAD has consequently only risen modestly in response. But there may yet be more to come, as US 2 year yields have moved sharply higher in recent weeks, and the US/Canada 2 year spread is the highest it has been since the late 1990s. Canadian yields are only very modestly lower on the news, with the December meeting still seen as representing around a 25% chance of a 50bp cut, with a 25bp cut still favourite. But current spreads suggest there may be scope for USD/CAD to break above 1.40 if US yields retain their firm tone.