CAD: Trade the bright spot - RBS

FXStreet (Guatemala) - Analysts at RBS explained that the key release next week in Canada will be the trade balance.

Key Quotes:

“Trade balance which surged to multi-year large surplus in July”.

“Exports are a key theatre for the Bank of Canada, and the improvement in trade has indeed put pressure on the Bank of Canada's dovish outlook”.

“Still, our baseline scenario that the Bank of Canada retains a dovish tone was bolstered by comments from two deputy Bank of Canada Governors this week”.

“Senior Deputy Governor Wilkins revealed that the Bank of Canada estimates that the neutral policy rate likely lies between 3-4%, though this estimate is expected to be updated and expanded upon in the October Monetary Policy Report”.

“With the Fed's own median long-run interest rate estimate at 3.8%, there is a risk that the Bank of Canada announces in October that its estimate of neutral rates in Canada are lower than those in the US”.

“We remain buyers of USD/CAD though see the regional outperformance as supporting the CAD on the crosses, including against AUD and NZD”.

“A comparison of Economic Surprise Indexes shows Canada as the fourth highest, below only Australia, Norway, and the US”.