J.P.Morgan Go Short GBP/CAD

Late Friday saw J.P.Morgan note that they "have been constructive on CAD throughout most of 2021. That bullishness came to a head when the BoC demonstrated its policy leadership, officially ushering in the era of policy normalization in G10. Tactically, however, we were rather painfully stopped out of our AUD/CAD short just before the meeting; CAD weakness had been pronounced (alongside USD) to start the month, which we attribute to Canada's worsening third-wave of COVID infections damaging expectations of what the BoC might signal. Instead, the BoC not only tapered but also pulled forward their rates guidance to 2H22, the most definitive such change among any major central bank thus far. Inherent in this was the BoC's willingness to look through the new COVID wave as a temporary phenomena, which sets the table for CAD's outlook going forward - a domestic economy that should remain resilient through 2H, and one that is buffeted by strong U.S. growth and demand for CA exports, as well as a backdrop that continues to forecast higher oil prices globally. While the CA rates curve is now understandably steeper than most peers, we nevertheless continue to like the leverage to the strong U.S. growth narrative as well as still-solid global growth to complement our set of USD longs - and we elect to sell GBP/CAD (spot ref. CAD1.7316. Stop-loss CAD1.7662.). Attention now turns to the pace of tapering, which is conditional on how the economy evolves and will continue to inform CA rates pricing of hikes relative to peers."