USD/CAD more likely tests 1.25 before 1.35 - Westpac

Research Team at Westpac, suggests that the USD/CAD more likely tests 1.25 before 1.35 in summer even though recent data has been weak, including larger than expected trade deficits and weak FT jobs.

Key Quotes

“Fort McMurray wildfire disruptions likely the cause and as such weak data should be ignored. H2 outlook in any case looks solid as activity bounces back from the disruptions and as Trudeau's fiscal stimulus kicks in. OIS gives 50% odds of a BoC cut by Mar 2017 but that is excessive given the strong 2016H2 growth outlook and as base effects of earlier lower oil prices feed into a higher CPI in 2016H2. US elections the major risk factor. A tight race will see USD/CAD firm given Trump’s anti-NAFTA/immigration stance.

Technical: USD/CAD heading towards the top end of recent ranges and no compelling argument for a break.”