The Bank of Canada is widely expected to leave rates at 1.75% Wednesday, according to BOCWATCH, while the Federal Reserve will probably cut by 0.25% FEDWATCH.
Option pricing isn't looking for a huge reaction, but USD/CAD overnight implied vol still demands the most premium in the G10 majors nL2N27F059.
Option-market risk reversals (one-month 25 delta) have recently erased their CAD put (topside USD/CAD) vol premium, which is a rarity in this pair and shows the market is less concerned with spot gains than losses for now.
The danger for USD/CAD is huge 1.3000 option barriers - a level not traded in a year.
1.3043 was Tuesday's low and before that it met solid support at 1.3018-16 in mid-July, so 1.3000 will remain a tough nut to crack.
If the BoC remains neutral in its outlook and the Fed signals anything other than recent cuts were a mid-cycle adjustment, it would put more pressure on USD/CAD, with a turn for CAD calls in the risk reversal forewarning of an increased 1.30 threat.