FX TRADE IDEAS BY LLOYDS TSB

The Canadian employment data today has underlined the robustness of macro fundamentals and though an imminent rate hike is not on the agenda considering the tone of the latest Bank of Canada statement, it does keep alive prospects for a tightening in monetary policy later this year.

Sell AUD/CAD 1 month forward at 0.9995, stop 1.0220 (spot), initial target 0.96.

The Canadian employment data today has underlined the robustness of macro fundamentals and though an imminent rate hike is not on the agenda considering the tone of the latest Bank of Canada statement, it does keep alive prospects for a tightening in monetary policy later this year. Regardless of whether the US employment data is strong or weak, the CAD ought to benefit against the AUD in the short run as a result. Strong US data will emphasise the relative strength of North American growth, push up US and Canadian yields, and help strengthen the CAD across the board. Weaker US data would limit the upside for US yields, but would probably not dramatically undermine the North American growth story given recent strong data.Canada should still perform well, and the AUD’s upside would likely be more restricted if equity markets showed disappointment.

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