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Previewing tomorrow’s GDP report, “The Canadian economy likely turned in a solid performance in the second quarter, with our final growth tracking 3.3% (q/q, annualized),” said TD Securities analysts.

Key quotes

“The GDP data will provide an important setup for CAD ahead of the BOC decision next week. While FX markets have not been as conditioned as rates to look for bad news, a better slate of data in Canada will likely help to reinforce that the CAD – unlike most of its G10 peers – will be more difficult to uproot.”

“Rates markets are nearly fully priced for a cut in October. Despite this however, USDCAD remains dislocated from the curve which would otherwise imply that the pair should be trading a touch lower from here.”

“Barring a trade surprise, a solid GDP print – particularly on the industry level measure – and absence of risk off should leave USDCAD prone to consolidate below 1.33, which has been a struggle to break topside. The latter may be reflective of price action that has become fatigued. A material extension lower however (i.e. below 1.32) may require a much larger surprise than we are expecting on the industry measure, especially with investor focus situated on external developments.”