CAD: Key inter-related supports have swiftly reversed - Westpac

According to Richard Franulovich, Research Analyst at Westpac, key inter-related CAD supports - BoC rate hike expectations and firming growth – have swiftly reversed.

Key Quotes

“Our Canada data pulse is in free fall, the data run in recent weeks including weaker permits (-5.5%), CPI (1.6% ann vs 1.7% est), the BoC outlook survey (easing to 19 from 31), retail sales (-0.3% vs +0.5% est) and Aug GDP (-0.1% vs +0.1% expected).”

“The BoC retains a tightening bias but it’s lukewarm. “While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate”. Our base case is that the BoC and markets have shifted too far into the cautious camp. Weak data is payback for earlier strength and underlying trends remain positive. Trudeau’s 2016 fiscal stimulus is still washing through the economy, US growth prospects are firm while oil prices are at multi-month highs.”