CAD: The currency is to strengthened even more, with looming BoC meeting

CAD overnights trade at a premium to most majors and the loonie’s 1-mo. tenor ahead of dueling U.S. and Canadian payrolls; a soft Canadian number could dampen expectations of a near-certain BOC rate hike next week.
* CAD mid overnights trade as high as 15.3300 intraday, highest level since early January, as the spread to the 1-mo. tenor, at 5.0425, reaches its highest level since November
* By contrast, the CAD 1-week, a tenor that includes the BOC meeting on July 12 and G-20 meeting, is 10.5950
** Odds of a 25bp hike at the meeting has risen to nearly 90% after upbeat trade data, according to Bloomberg’s OIS calculations
* "An almost perfect combination of ripping exports and enough strength in the domestic economy to pull in more imports reflect what the BoC has emphasized to be more diversified growth, writes Derek Holt, Head of Capital Market Economics at
Scotiabank.
* Estimates for the net change in employment in Canada range from +21.4k to -5K with the median estimate +10K; unemployment rate is seen holding steady at 6.6%
* CAD 1-week 25D risk reversal rises to 0.0925, highest level since June 12, with equivalent strikes attractively placed at 1.3071 and the Sept 7 low of 1.3823 using 1.2937 spot rate
* Oil production disputes or G20 protectionist rhetoric could add to CAD price volatility
* EUR/USD options most active so far, accounting for 17.4% of total volume, trades reported by DTCC show, with current volumes below the recent average

Source: Bloomberg Pro Terminal

Trader - S. Fuchedzhiev

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