CAD flows: CAD lower on BoC cut

The expected rate cut from the BoC has materialized, and USD/CAD has initially moved 40 pips higher to 1.3710. But the cut was 80% priced in, and there is little guidance in the statement about  future policy, so we wouldn’t expect much immediate followthrough. Nevertheless yield spreads do support USD/CAD moving a little higher, and although there is potential for US yields to drop back given the below trend growth seen in the US in H1 this year and the run of weaker US data, there is still scope for USD/CAD to press towards 1.38 if US yields hold steady.