The Bank of Canada held rates and hinted the easing cycle could be over
The Canadian dollar surged after the BOC decision to leave rates at 0.75%. The move might have been short-lived if not for the accompanying statement that also removed the bulk of any dovish bias.
"The risks around the inflation profile are now more balanced," it said.
USD/CAD immediately dropped to 1.2470 from near 1.2538. After a 30 pip bounce it made new lows at 1.2447 and then bounced again to 1.2467 before falling to 1.2445.
USD/CAD has been is caught up in a wave of US dollar buying but the Canadian dollar is ripping on the crosses. We wrote about a call for EUR/CAD shorts just before the BOC decision and that trade is already deep into the money at +140 pips. (How about this call from BNP)
I don't think this move is done. There were some heavy bets on BOC easing continuing and unless oil collapses again, it's beginning to look extremely unlikely. USD/CAD will need to battle to break through support at 1.2380-50 but there is no support for 300 pips below that.
Still, the better money might be made on the crosses or with a basket.
