USD/CAD is tracking short rates, which suggests we will get a reaction to the Bank of Canada (BoC) meeting today, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

BoC can afford a pause

USD/CAD used to track long-term rate differentials more closely than short-term ones, but like several other currency pairs, the degree of global uncertainty has shorted the market’s perspective. 

With lower inflation than the US, and helpful labour supply growth, the BoC can afford a pause, but a clear indication that peak rates haven’t been reached is surely needed to get USD/CAD any lower than this