Citi

G10 in focus

NZD traded at 0.7038 at time of writing. Few local details to report as underpinning the mood. This suggests the rally is a product of positive off-shore risk sentiment alongside potentially month-end linked activity. CitiFX note several optimistic formations including: recent morning star, completed inverted head and shoulders, alongside triple momentum divergence seen the previous week’s close. Look out for resistance up ahead in the 0.7096-0.7116 range.

Equities saw the S&P index close mildly weaker by -0.1% to 4522. Outflows were most notable in the energy sector, and correspond to crude prices -1.0% lower towards $68.50 as of writing. This appears to reflect mild position trimming ahead of the Wednesday OPEC+ meeting 16:00 BST. For levels to consider in the oil space. Over in the rates space, choppiness characterized early activity before Treasuries selling took hold over the afternoon. Consequently, we see the 10y sit roughly 3bps higher at 1.309% as of print.

CIBC

FX Flows

USDCAD has been rather bid this morning, paying no attention to the price of oil futures. Oct futures contracts advanced to $68.73 while USDCAD firmed up. We think Aisa is doing a follow-through from last night especially after the GDP.

Our head of FICC, Ian Pollick said, we are taking the opportunity to update our views on what we think this means for the BoC, as well as general market opportunities. The expenditure data for Q2-21 suggests the Bank’s Q3-21 estimate, of 7.3% SAAR, will be harder to achieve. What was also ignored this morning was the implied GDP deflator, which showed continued gains. We are seeing this national income increasingly being saved and not spent. What is likely to happen on the back of this data is one of two things, either: i) the Street raises 2022 growth figures to maintain hiking profiles, or; ii) pushes back the output gap closure and therefore pushes hike/s into 2023. We do not believe today’s data is enough in isolation to delay a tapering at the October Monetary Policy Report.We continue to expect a C$1.0bn reduction to the weekly pace of the Government Bond Purchase Program.

With Canadian election set on September 20, Bipan said that as usual with each election, we’re fielding lots of questions as to whether this campaign will mean anything for CAD assets - including the Loonie. To summarize the main point of this note – it’s our view that this election is unlikely to mean much for the CAD. In fact, most election campaigns in Canada don’t really end moving the dial for the Loonie at all. That shouldn’t surprise anyone that is even remotely familiar with Canadian markets.