Archived IMT (2009.03.03)

The 14:00 GMT BoC rate decision is widely expected to produce a 50-bp rate cut to a record low of 0.50%. USDCAD at 3-month highs, approaching the 1.30 resistance, which held since 2004. Considering the extent of the downside ahead for the US and Canadian economies as well as the case for renewed equity downside in the next 6 months, the 1.30 barrier appears increasingly vulnerable to a break, which would lead towards 1.34. A 50-bp rate cut may not be sufficient in attaining the break today, especially if risk appetite further improves ahead.