On Friday, GDP data is due in Canada. Analysts at TDS, look for a reading of -0.1% in industry-level GDP in April and the annual rate at 2.5%.
Key Quotes:
“TD looks for industry-level GDP to edge 0.1% lower in April. Manufacturing output will be constrained by refinery shutdowns, which drove an outsized pullback in factory sales for the month, but stronger motor vehicle output should provide a partial offset. Construction should also provide less of a tailwind than recent months on the slowdown in the residential component. For services, we expect continued weakness in real estate due to the soggy housing market while food services and retail add another source of downside due to inclement weather.”
“This may seem like a shock of cold water ahead of the July BoC, but we would note that the 0.3% print in March provides some insurance for Q2 should we get a weak print in April. Thus, barring significant disappointment (a -0.2% print or lower), we think the Bank will be comfortable to look through a relatively weak GDP print, especially considering weather and other one-offs, and proceed with a July rate hike.”
“A miss on the GDP print, however, probably leaves the meeting as a coin toss as a few basis points will get priced out. Still, the loonie has a fair amount of negative priced in at the moment and the selloff over the past month reflects some repricing of the July meeting. Oil prices have helped to stem some of the bleeding and we prefer to buy into dips towards 1.3150 then to chase the move higher from here. We still see scope for a push towards 1.35 over the summer. In the same light, we believe that even if the Bank hikes next month it should translate into a “sell the fact” rally in USDCAD.”
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