Week ahead Canada macro digest - TD Securities
|"Wholesale and retail sales are released on Tuesday and Wednesday and will give the final read on activity data ahead of Q2 GDP," TD Securities point out.
Key quotes
"We will also hear from Bank of Canada Deputy Governor Wilkins, who is participating in a panel discussion in Frankfurt at 9:15 ET this morning. NAFTA discussions will continue between the US and Mexico, who have yet to come to an agreement on motor vehicles. Governor Poloz will also appear on a panel discussion at the Fed's Jackson Hole Symposium on Saturday."
"Rates Market Outlook: The strong CPI figures will have a lingering impact on markets this week, as it revived the smoldering speculation around a possible BoC hike in September. In the near-term we look for the front-end to underperform on the curve, and we are biased to see 10s outperform versus 2s and 5s with 10s30s holding tight between 0 and 2 bps. That said, markets are not likely to shift BoC expectations too aggressively ahead of Governor Poloz's appearance at Jackson Hole."
"FX Market Outlook: Markets have gotten excited over the prospect of a September hike following last week's headline CPI beat. We think this week will prove pivotal for the CAD however as the focus remains firmly on the activity data (retail sales especially and implications for GDP tracking) and on Poloz's Jackson Hole appearance. The latter likely represents one of the last opportunities for the Bank to telegraph anything on the policy front ahead of the blackout period that takes effect before the GDP print next week. Barring an outright capitulation on USD longs, we look for USDCAD to respect its broad 1.30/1.32 range, with 1.3050 increasingly looking like a formidable support marker. We also believe EURCAD has topside appeal with the EUR looking deeply oversold in spot and contagion fears from TRY likely overstated. 1.49 should offer support on dips in cash; we also like 1-month risk reversals as well."
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