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No one's saying he's definitely going to do it, but markets are speculating that Stephen Poloz may well follow up his surprise rate cut with another one.

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Which puts a whole new spin on trying to forecast the fortunes of the Canadian dollar.

Mr. Poloz and his Bank of Canada colleagues surprised the markets in January by cutting their benchmark overnight rate by one-quarter of a percentage point, to 0.75 per cent, taking out what the central bank governor called an insurance policy amid the oil slump.

That sent the currency into a tailspin on that day alone, though it had been falling, and it continued to fall further afterward, pulled lower by the collapse in oil prices and the "dovish" nature of the central bank.

That dovishness is all the more noteworthy given that the central bank's U.S. counterpart, the Federal Reserve, is heading toward a rate hike, possibly in June.

Here's what Camilla Sutton, the chief currency strategist at Bank of Nova Scotia, would expect to see if Mr. Poloz grew ultra-easy and indeed cut again in March, and why:

A second cut would mean that oil prices are even lower, because the central bank would otherwise not feel the need to act.

Coupled with that is the fact that markets are now pricing in a 28-per-cent possibility of a March move, and a 75-per-cent chance of action within six months.

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That means they're not overwhelmingly counting on a cut at the central bank's next meeting. Which, in turn, means another cut would be another surprise and, thus, a "significant reaction" for the Canadian dollar.

Such a scenario could drive the loonie down to the 75-cent range, Ms. Sutton said.

"The central bank dynamic has been the biggest surprise that has exacerbated the rally we have been looking for in USD/CAD," added senior currency strategist Greg Moore of RBC Dominion Securities, referring to the rally in the U.S. dollar versus the loonie, or, looked at the other way, the slump in the Canadian currency against the greenback.

"While we anticipated that the BoC would adopt a more dovish outlook on oil prices and the energy sector landscape, a rate cut was entirely off of our radar," he added in a report that projects the loonie will sink to 75 cents by the middle of the year, before regaining ground.

"With the surprise rate cut so clearly linked to oil, monetary policy expectations for the rest of the year should be reliant on the direction of oil and the energy landscape more than ever."

The longer that West Texas Intermediate crude remains below $55 a barrel, then the "greater pricing will be for another cut," Mr. Moore added, referring to the U.S. oil benchmark.

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So far this year, the loonie has touched a low of 78.22 cents, which it hit on Friday, having sat above 94 cents a year ago.

Indeed, noted chief economist Douglas Porter of Bank of Montreal, January's 9-per-cent plunge was historic.

"To put that into perspective, there has only been one year when the Canadian dollar has dropped by more than 9 per cent (2008), let alone a month," he said.

But Ms. Sutton, too, put an interesting perspective on it, citing the fact that the Canadian dollar has averaged 80.77 cents over the past 35 years, and we're not far off that mark.

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