8 Dec 2014
Disappointing data dampens CAD – TDS
FXStreet (Barcelona) - According to the TD Securities Research Team, soft trade report, and a correction in Canadian jobs data, combined with the strong US numbers, supported CAD’s decline versus the USD.
Key Quotes
“Friday’s Canadian data run was hardly out of line with our expectations—a correction in jobs after the recent gains and a soft trade report—but the contrast with the strong US numbers alongside a renewed turn lower in oil prices (WTI is off nearly 2% this morning and Brent has hit a new 5-year low) are producing some significant headwinds for the CAD, which slipped to a minor new cycle low versus the USD.”
“In addition, comments from Governor Poloz added to the morose mood for the CAD; the governor’s reported remarks from an IMF event focused on low oil prices undercutting growth and weakening output—little new there really but there was no room for the markets to read anything too constructive into those observations. Note that the governor is speaking at the Economic Club of New York on Thursday; there will be a Q&A afterwards.”
“Better US/soft Canadian data provided a further lift for US-Canada spreads; the 5-year gap nudged up to around 20bps Friday, the widest since July. Wider yield spreads in the USD’s favour and weak commodity prices working against the CAD suggest to us that USDCAD should probably be trading quite significantly higher already; our FV estimate for USDCAD this morning has risen to 1.1680.”
“The charts are still very supportive for USDCAD overall, in our opinion, and so far today, cross flows are not quite the block on the potential for USDCAD gains that we saw last week. We look for solid support for USDCAD on dips to the low 1.13 area intraday and, given all the above, we think a push through to new cycle highs really should not be long in coming.”
Key Quotes
“Friday’s Canadian data run was hardly out of line with our expectations—a correction in jobs after the recent gains and a soft trade report—but the contrast with the strong US numbers alongside a renewed turn lower in oil prices (WTI is off nearly 2% this morning and Brent has hit a new 5-year low) are producing some significant headwinds for the CAD, which slipped to a minor new cycle low versus the USD.”
“In addition, comments from Governor Poloz added to the morose mood for the CAD; the governor’s reported remarks from an IMF event focused on low oil prices undercutting growth and weakening output—little new there really but there was no room for the markets to read anything too constructive into those observations. Note that the governor is speaking at the Economic Club of New York on Thursday; there will be a Q&A afterwards.”
“Better US/soft Canadian data provided a further lift for US-Canada spreads; the 5-year gap nudged up to around 20bps Friday, the widest since July. Wider yield spreads in the USD’s favour and weak commodity prices working against the CAD suggest to us that USDCAD should probably be trading quite significantly higher already; our FV estimate for USDCAD this morning has risen to 1.1680.”
“The charts are still very supportive for USDCAD overall, in our opinion, and so far today, cross flows are not quite the block on the potential for USDCAD gains that we saw last week. We look for solid support for USDCAD on dips to the low 1.13 area intraday and, given all the above, we think a push through to new cycle highs really should not be long in coming.”