15 Apr 2015
USD/CAD might drop below 1.2450 if BoC remains neutral – TDS
FXStreet (Barcelona) - The recent economic data out of Canada suggests the BoC might adopt a wait and see approach and maintain rates on hold today, as such a neutral tone might lead USD/CAD to drop towards or even below TD’s fair value estimate at 1.2450, view FX Strategists at TD Securities.
Key Quotes
“The central bank palooza continues today with the BoC policy announcement and MPR (at 10:00ET), followed by Governor Poloz’s press conference (at 11:15ET). There is no expectation of any change in rates today, a view we fully concur with.”
“Market reports suggest one or two banks favour the BoC adopting a more dovish bias today and have been tipping USDCAD to rally again following the Boc’s decision as a result. We do not expect such an outcome.”
“The Canadian economy has been sluggish but the data run has hardly reflected the “atrocious” term used at the end of March by Governor Poloz to describe the impact of the oil slump on Canadian growth. The latest construction, trade and employment data have all surprised to the upside and market expectations of a follow up cut have eased significantly in the past few weeks. The governor has plenty of time to weigh the need—or not—for more insurance.”
“The bottom line for us is that the recent narrowing in US-Canada spreads alongside the stabilization in commodity prices, especially crude oil, has opened the window for a modest improvement in the CAD. Our model suggests that USDCAD should be trading around 1.2450 today.”
“With funds staging a modest rally in the early morning session (following WTI), we think a push to this level or below is likely if the BoC delivers a somewhat balanced or more neutral tone as we expect.”
“While there is no incentive for the Bank to sound upbeat, our sense is that the bar to push funds materially higher from here is high given that Poloz has delivered a lot of rhetoric already to talk down the growth impacts from the oil shock (i.e. ’atrocious’).”
Key Quotes
“The central bank palooza continues today with the BoC policy announcement and MPR (at 10:00ET), followed by Governor Poloz’s press conference (at 11:15ET). There is no expectation of any change in rates today, a view we fully concur with.”
“Market reports suggest one or two banks favour the BoC adopting a more dovish bias today and have been tipping USDCAD to rally again following the Boc’s decision as a result. We do not expect such an outcome.”
“The Canadian economy has been sluggish but the data run has hardly reflected the “atrocious” term used at the end of March by Governor Poloz to describe the impact of the oil slump on Canadian growth. The latest construction, trade and employment data have all surprised to the upside and market expectations of a follow up cut have eased significantly in the past few weeks. The governor has plenty of time to weigh the need—or not—for more insurance.”
“The bottom line for us is that the recent narrowing in US-Canada spreads alongside the stabilization in commodity prices, especially crude oil, has opened the window for a modest improvement in the CAD. Our model suggests that USDCAD should be trading around 1.2450 today.”
“With funds staging a modest rally in the early morning session (following WTI), we think a push to this level or below is likely if the BoC delivers a somewhat balanced or more neutral tone as we expect.”
“While there is no incentive for the Bank to sound upbeat, our sense is that the bar to push funds materially higher from here is high given that Poloz has delivered a lot of rhetoric already to talk down the growth impacts from the oil shock (i.e. ’atrocious’).”