CAD has rallied 1.67% since the BoC meeting on April 15. Recall, the BoC provided an upbeat outlook, forecasting a strong payback in growth and inflation in H215. February GDP beat expectations but was offset by the rise in US wage growth, which sparked a mild recovery in the greenback. The report coincides with the BoC’s forecast but we still see downside risks to their longer-term growth outlook.
This week presents more key data releases – namely, the April PMIs and employment report. The PMIs dropped below 50 in February and many observers expect the indices to remain subdued in April.
Meanwhile, the April employment report gets released on Friday. The US report will likely overshadow it but a soft number could see CAD pare some of its recent gains.
USD/CAD broke below the 1.20 level for the first time in months. However, it looks rich relative to short term drivers against the USD but we think it can outperform on the crosses if US payrolls bounce back.
