TD on the Bank of Canada decision
TD -- like just about everyone -- expects the Bank of Canada to hike interest rates on Wednesday but what comes next and what the BOC signals will be what matters for the Canadian dollar.
They think that trade tensions and the likelihood of the Bank of Canada heading to the sidelines sets up a 'buy-the-rumour/sell-the-fact' trade in the loonie, with USD/CAD likely to move higher after the kneejerk.
"We see attractive risk/reward in scaling into CAD shorts with the 1.3100/50 area in USDCAD an appealing pivot to enter such a strategy," they write.
USD/CAD is currently trading at 1.3267.
They say the loonie's best days are in the rearview mirror and that the market is underappreciating trade risks.
"We think the 1.3100/50 area is beginning to look more like a bottom for USDCAD, making it attractive risk/reward to begin looking topside again where 1.35 remains on our radar," they write.
Aside from USD/CAD, they like loonie shorts against EUR, JPY and NZD.
