Richard Franulovich, Head of FX Strategy at Westpac, notes that a constructive tone continues to permeate US-Canada NAFTA negotiations, reports that the US has ceded its contentious “buy American” demands on procurement projects the latest step forward.
Key Quotes
“Market pricing for BoC hikes still on the light side. OIS markets price in an 81% probability for a +25bp hike at their next meeting Oct 24, but beyond that do not fully price in another follow up hike until April 2019.”
“Leading indicators point to growth moderating in coming quarters (see over) though still at an above trend pace. That and fading NAFTA risks suggest the BoC could hike faster than market pricing. Against that backdrop USD/CAD can trade more sustainably in a new sub-1.3000 range into year’s end.”
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