AUD/CAD: All eyes on Canadian GDP and central banks
- AUD/CAD bull's one last effort to hold support ahead of what could be one-way traffic in CAD.
- Should the Bank of Canada hold-off after a strong GDP number, the floor in AUD/CAD could melt away.
AUD/CAD bulls have been holding the fort in the 0.8900/20s ahead of the Canadian GDP today and the Australian next week. What is key, are the respective central bank meetings next month as well.
Canadian GDP
First up, Canadain GDP - A better-than-expected GDP print will indeed be emphasising a reduced urgency for the Bank of Canada to be preemptive on rates, particularly with the October meeting nearly fully priced. Markets will look to the USD/CAD levels of 1.33 to be reinforced. Analysts at TD Securities note risk of a break below 1.32 on a larger surprise than expected.
BoC
Analysts at TDS offered their views:
- "While we think the BOC will eventually ease (Jan 2020), there is no urgency to do so."
- The economy is expected to moderate in H2 but from a solid +3% rate in Q2. Importantly, financial conditions have appreciably eased since the July MPR. Much of this has come from 5yr bond yields, which will further aid a recovering housing market."
Meanwhile, the price of oil has been a supporting factor to the Loonie on demand factors, but that comes second the trade war headlines that have seen a vast improvement in terms of optimism for a trade deal in the past 48-hours, subsequently giving the Aussie a fresh tank of oxygen. Should there be a continued improvement there, risk appetite flooding back will only go to serve a less dovish Reserve Bank of Australia outcome next month and likely support the Aussie further. However, will it put the bank on par with the BoC? Probably not. Should the Bank of Canada hold-off after a strong GDP number, the floor in AUD/CAD could melt away and keep the cross on the backfoot for an extended period of time.
AUD/CAD levels