CAD to underperform - Westpac

Weakness in crude oil together with NAFTA concerns, given more prominent tariff comments from the Trump Administration, and a surprise miss in Dec wholesale trade has seen CAD underperform, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Dec retail sales and Jan CPI into the end of this week could be critical for expectations into the next BoC meeting. Expectations for BoC to hike have persisted (still close to 50bps priced in OIS for Oct MPR).”

“Although markets are looking for headline inflation to pullback, it is the core reading that will be more important. It is expected to tick higher to 2015-16 highs of 1.7%. The softer than expected wholesale data raises concern of a less active retail sector.”

“The shift in focus towards the risk of a more active Fed may cause a secondary flush before CAD strength returns into the BoC’s 7 th Mar. meeting.”