FXStreet (Barcelona) – The TD Securities Team offers the outlook for USD/CAD into Canadian GDP data release, and further add that the bid in CAD will likely prove temporary.
Key Quotes
“With the exception of the June 18th Fed meeting, USDCAD has felt stuck for the past several weeks. We see little scope to trade funds this week but we do think that today’s industry level real GDP report for April may leave an impressionable, albeit temporary, impact on funds. We look for a slightly better outcome compared to the market (+0.2% m/m vs. +0.1% m/m) though this will still leave the Q2 tracking estimate sub-1% (BoC: 1.8%). Given the way the market has traded yesterday (BAXs were bid yesterday), we suspect that the market is looking for GDP disappointment. Though the Greek turmoil may also explain this, it nonetheless sets us up for an asymmetric risk around USDCAD and CAD on the crosses more generally. That is, a positive surprise may impose a greater reaction than a disappointment.”
“So while we look for a beat in GDP, we view the bid in CAD as temporary as markets should realize that Governor Poloz’s narrative of a rather decent rebound will remain challenged—a view that will be further entrenched if industry GDP disappoints today.”
“We think that the risk from here is that the economy continues to disappointment relative to the Bank’s rather optimistic outlook in the second half of the year, weighing on the CAD. Our daily model estimate suggests spot should be higher around 1.2450.”
(Market News Provided by FXstreet)