CANADA: USDCAD Beyond A Hawkish BoC
Jun-02 15:37
- At sub-1.26, USDCAD has now slipped -3.7% from the May 12 high of 1.3077 from a combination of a rolling over in USD strength and strong CAD factors including surprisingly strong inflation.
- The latest slide in the pair following recent BOC hawkishness (latest being Dep Gov Beaudry on increasing chance of rates north of 3%) and USD weakness sees the pair sitting just above support at 1.2562 (61.8% retrace of the Apr 5 – May 12 bull run).
- As noted in the MNI BoC Review, there is a wide range in some analyst expectations for the pair: TD view CAD as the most overbought on their dashboard and sees a high frequency fair value of 1.27-1.28 whilst ING sees a supportive CAD backdrop supporting both in the short-term by offsetting USD appreciation and longer-term with USDCAD eyed at 1.22 year-end.
- Some of this uncertainty comes from a real effective exchange rate sitting very close to long-run averages (offering little bias) and CFTC net spec positioning has shifted to a net short position but isn’t particularly large historically which could move either way.
- In addition, the pair remains heavily led by risk sentiment, with greater risk-off flows easily having potential to unwind recent moves.
Source: Bloomberg
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OUTLOOK: Wednesday Data Calendar, ADP, ISM, FOMC and Fed Chair Presser
May-03 15:36
- US Data/Speaker Calendar (prior, estimate)
- May-4 0700 MBA Mortgage Applications (-8.3%, --)
- May-4 0815 ADP Employment Change (455k, 385k)
- May-4 0830 Trade Balance (-$89.2B, -$107.1B)
- May-4 0945 S&P Global US Services PMI (54.7, 54.7)
- May-4 0945 S&P Global US Composite PMI (55.1, 55.1)
- May-4 1000 ISM Services Index (58.3, 58.5)
- May-4 1130 US Tsy $30B 119D bill auction
- May-4 1400 FOMC policy annc
- May-4 1430 Fed Chair Powell presser
CANADA: USDCAD Moves Lower As Yield Differentials Narrow
May-03 15:28
- FI: GoCs continue to underperform Tsys, twist flattening as front-end yields remain higher on the day compared to the outright bull flattening in Tsys (and with similar moves in STIRs).
- It sees the Can-US yield differentials narrow notably on the day to -5bps for the 2Y and -0.5bp for the 10Y, both towards the middle of 3mth ranges.
- FX: USDCAD trades -0.32% at 1.2839 amidst flickering USD strength, with CAD lagging AUD and NOK of the commodity exporters.
- The pair has erased yesterday’s gains but the outlook is still seen as bullish. Resistance is eyed at 1.2914 (May 2 high) after which it would open the medium-term bull trigger of 1.2964 (Dec 20, 2021 high), whilst support is seen at 1.2719 (Apr 29 low).
PIPELINE: UBS 3Pt on Tap
May-03 15:18
- Date $MM Issuer (Priced *, Launch #)
- 05/03 $Benchmark UBS Group 4NC3 +180a, 4NC3 SOFR, 6NC5 +200a
- 05/03 $Benchmark Excel Energy 10Y +190a
- $3.85B Priced Monday
- 05/02 $1.85B *Constellation Brands $550M 2Y +90, $600M 5Y +135, $700< 10Y +180
- 05/02 $1.5B *Georgia Power $700M 10Y +175, $800M 30Y +210
- 05/02 $500M *Northern States Power 30Y +148
