CIBC With Long USDCAD Expressions

CIBC trade recommendations from yesterday

• Long USD/CAD via spot. Entry 1.3530, target 1.3950, stop 1.3350.
• Long USD/CAD via 3-mth call spread (USD call, CAD put). Spot ref 1.3530, strikes 1.3750 and 1.4000, ratio 1x1. Expiry Dec 14, breakeven at expiry 1.3800, indicative premium 50 CAD pips on notional US$100m. Like call spread vs vanilla call as don’t see spot USDCAD ending up above 1.40 by the end of three months.
• “Market pricing for next year is inconsistent. There are clear signals being sent that the US economy is more resilient amidst higher interest relative to other economies. And yet, OIS markets are currently pricing in more easing for the Fed relative to other central banks.”
• “The backdrop in Canada looks weaker. The BoC admitted last week that a period of weaker growth is to be expected given the “marked weaking” in consumption growth for Q2. Additionally, the Bank flagged slowing household credit growth due to the impact of higher rates, while the evidence points to labour market conditions beginning to loosen gradually.”