Societe Generale FX Strategy Research notes that on yesterday’s speech from BoC Senior Deputy-Governor Wilkins, the front end of the Canadian rates market has priced over a 50% chance of a rate hike compared to a 30% chance as of last Friday.
“She cited broadening growth across sectors, a reduced drag from soft oil prices and solid Q1 growth as reasons for optimism,” SocGen adds.
“What is striking isn’t so much the tone however as the market reaction. That reflects underlying CAD bearish views and positioning and a sensitivity therefore to any upbeat news or signs of hawkishness.
We think CAD is the cheapest of the four G10 dollars, and it’s that valuation that gives it room to rally further over time (albeit probably after a pause now),” SocGen argues
Source: Societe Generale Cross Asset Research
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