Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes the CAD outlook ahead of the Bank of Canada (BoC) interest rate decision.

USD/CAD and US rates – both have probably peaked

“No-one expects a change in rates. However, futures traders have built up the biggest short CAD position since January 2019, just after the last Fed rate hike of the cycle that started in late 2016. USD/CAD peaked above 1.36 after that hike, before falling in 2019.” 

“USD/CAD tracks relative US-Canadian rates, but by far the biggest driver that spread is the trend in US rates.”

“We think USD/CAD has peaked and will drift lower back towards 1.25 in the coming months – even if sticky core CPI and a bland BoC policy statement don’t point to fireworks today.”

See – BoC Preview: Forecasts from eight major banks, staying on the sidelines