BoC: roughly a 40% chance of a cut is priced for April – TDS

USDCAD was down 0.2% to 1.3229 overnight, analysts at TD Securities note that it will be a busy week for Canadian data next week, with the first look at real activity data for December.

Key notes

• While markets have (rightly) discounted the risk of a BoC cut in March, roughly a 40% chance of a cut is priced for April which leaves room for swings in either direction depending on the evolution of the data.
• Risk/reward considerations favour steepeners over outright positions in CAD rates.
• We expect manufacturing sales to decline by 0.1% in December (market: 0.7%) owing to a combination of weaker auto production and lower factory prices.
• While exports were up 1.9% m/m during the month, the increase was led by raw materials (crude oil, minerals) and exports of manufactured goods were actually lower on the month.
• Manufacturing volumes should post a mild increase, although we do not expect much of a contribution to industry-level GDP growth.