CAD steady and outperforming on crosses – Scotiabank

The Canadian Dollar (CAD) is trading flat against the US Dollar (USD) and outperforming all of its G10 peers on the crosses, ending the week also unchanged from last Friday’s close, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets price 80% chance of cut

"Domestic developments have been limited since last Friday’s massive jobs disappointment, and markets offered no material reaction to Thursday’s infrastructure announcement from PM Carney. Domestic rate expectations are soft heading into next Wednesday’s Bank of Canada policy decision, with markets pricing in 20bpts of easing—a sizeable build over the past week or so."

"Short-term interest rate differentials have moved against the CAD since late August, reflecting a rebuilding of easing expectations for the BoC that have outpaced those for the Fed. Canada will release building permits figures at 8:30am ET, however the figures are unlikely to be market-moving. In terms of our FV estimate, we currently have USDCAD at 1.3635. A narrower FV estimate—incorporating only the 2Y USCanada yield spread—would have USDCAD at 1.3944."

"USD/CAD’s technical signals are mixed with modestly bullish momentum indicators set against Thursday’s bearish outside reversal. The range from late July is flat, roughly bound between support at the 76.4% retracement level at 1.3744 and the upper-1.38/lower-1.39 area. We look to considerable resistance at the 61.8% retracement at 1.3944 and see a near-term range bound between 1.3800 and 1.3880."