TD Securities note that market exp. of.......>

CANADA: TD Securities note that market exp. of Bank of Canada tightening have

finally begun to cool following last week's mixed bag of data. While we our

macro team remains comfortable in a July hike exp. (~75% priced) our main gripe

is that cumulative tightening priced into the curve is beyond reasonable."

- TD also believe that "NAFTA is likely to be delayed further; though we expect

a deal by July, we think we have passed peak optimism insofar as it providing

support to the CAD. Canada also continues to run a fairly severe basic balance

deficit, which might be more relevant the more that NAFTA is delayed. This

should keep a medium-term negative anchor on the currency.

- As such, TD think the "CAD is at the cusp of a reversal of fortune. We eye a

re-test of 1.30 in USDCAD as the USD remains bid. We also see sig. value

expressing a bearish bias via crosses. Since the broad USD rally began in

mid-April, the CAD has been the most resilient G10 currency, outperforming its

major peers (except USD). The CAD has been most dominant vs. NZD. The curve for

RBNZ policy is quite flat, and with a cut a very unlikely outcome in our view,

the NZD makes for a good cross to express idiosyncratic CAD."