“April GDP surprised to the upside at 0.1% m/m in April (market: 0.0%, TD: -0.1%) despite a significant drag from weather and other one-offs. Without these, GDP would have printed at 0.3% or higher,” TD Securities analysts note.
Key quotes
“A key hurdle to a July hike was overcome with April growth confirming a firm footing for Q2 after a solid handoff from Q1. The door is wide open to July given Poloz’s emphasis on data dependence, and the GDP figures in particular. We keep our call for a 25bps July hike but still expect the Bank to stay a patient, data dependent path thereafter.”
“Rates: Front-end selling led 2s and 5s up 3-4bps as July rate hike expectations were boosted further to an 85% chance vs 68% ahead of the release. We position for a July hike though rates might struggle over the next week as trade tensions run high along with a few more data releases on the calendar.”
“FX: Stronger GDP data offers Poloz some wiggle room to follow through on a hike in July. However, we still like USDCAD higher and would use any relief rally to buy on the dips.”
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