[iForex]

The dust is settling a little after yesterday’s BoC announcement; the 25 bps cut in the overnight rate was as expected, as was the scant detail on additional credit or quantitative easing measures – which may come with tomorrow’s MPR and start later this year. No rush then and perhaps the sell off that we have seen in the CAD since yesterday’s announcement a little unjustified; we do not equate, for example, the expansion in the daily settlement balance, albeit a significant one, with the BoJ’s requirement for banks to hold outstanding current account balances far in excess of requirements when it began its QE programme. For the moment at least, the BoC is simply making a significantly higher daily settlement balance available, with no requirement that it be fully utilized. USD/CAD has continued to find good support in the upper 1.23 zone overnight and price action has remained somewhat choppy – to the point that the short term (1-hour) chart shows a small gap left open between 1.2390/00 by the overnight swings. With the MPR out tomorrow and risk aversion, the CAD may remain a little soft in the near term. But the BoC is moving towards QE at the speed of smell and good selling interest apparent on yesterday’s run up in funds suggests we should be wary of just how much the topside can extend beyond the 1.25 area. Not much, if at all, at the moment.