CAD probes best levels since Oct on weak USD - Scotiabank

Better than expected GDP data for Q1 provided a bit of a lift for the CAD Friday. The data saw some marginal repricing of swaps for Wednesday's BoC policy decision and a couple of Canadian banks reversed their forecast for a cut to a hold--in line with Scotia's view of no change, Scotiabank's Chief FX Strategist Shaun Osborne notes.

BoC expected to hold on Wednesday

"Under the hood, the Q1 data looked less impressive and growth prospects remain soft--preliminary indications for April GDP indicate a rise of 0.1%. Still, amid all the uncertainty about trade and tariffs, policymakers may well decide to sit this one out. Swaps pricing suggests around 20% risk of a cut. PM Carney will be pushing for intra-provincial trade liberalization to help offset the impact of US tariffs in meetings with Canadian premiers today. Progress here would be helpful in boosting domestic growth prospects to offset the impact of US tariffs."

"After struggling to hold the push through USD support at 1.3745/50 last week, the CAD starts the new week off back under 1.37 and pushing the USD down to marginal new cycle lows (lowest since early October). The broader downtrend in the USD may be accelerating a little, the charts suggest. Daily and weekly charts reflect USD-negative price signals forming last week and the intraday, daily and weekly trend oscillators remain USD-negative."

"That keeps technical risks focused clearly on the downside for USD/CAD and should mean solid resistance on any pop in the USD towards 1.3850/1.39--if the USD can get there at all. Support is at last week's 1.3685 low is under pressure and there is little below there ahead of a drop back to 1.34/1.35."