Bank of Canada kept rates on hold as widely expected

The BoC statement had a dovish slant (with the output gap now not expected to close until mid-2017) although it also showed no signs of wanting to cut rates further. In the press conference, Poloz went out of his way to emphasise that it takes six to eight quarters for the effects of policy changes to feed through and "we have probably not even seen half of the effects [of the Jan/July cuts] those forthcoming effects were taken into account in today's decision." 

But the BoC has been caught out by a need to cut more before (having thought it was one-anddone in January, a follow-up cut was needed in July). It also has a pretty optimistic outlook for non-energy exports (which in turn relies on a "solid" US recovery). Either it will be right on the US outlook, in which case the Fed seems underpriced, or it will be wrong, in which case further BoC cuts may be needed. 

"We are still comfortable with our call for USD/CAD higher (we have a 1.32/1.35 call spread expiring in March 2016)", notes RBC Capital Markets.