Archived IMT (2008.12.09)

Todays Bank of Canada rate decision (9am EST) is widely expected to produce a 50-bps rate cut to 1.75%, which would bring the accumulated easing to an aggregate of 275 bps since Canadian rates were cut in December 2007. Canada also had a horrendous jobs report of its own on Friday, with the net loss of 70.6K jobs in November (biggest monthly decline since 1982) and a rise in the unemployment rate to 6.3% from 6.2%. At its last rate cut, the BoC highlighted US weakness, falling commodities and continued weakness in credit markets as the principal negatives for its prolonged dovishness. With no improvement any of these, the BoC is widely expected to deliver a 50-bps rate cut. In the event of a 75-bp cut, CAD downside is expected to broaden, with USDCAD likely to overshoot to as high as 1.2720-40 before a retreat towards 1.2660s is guided by rallying equities.