CAD: Setting up for manufacturing sales - TDS

Research Team at TDS, suggests that Canada’s manufacturing sales are forecast to have advanced by 1.0% m/m in July, building on a 0.8% rebound in the prior month.

Key Quotes

“This reasonably robust advance in the headline series reflects reported strength in a broad swath of exports as well as an increase in industrial prices. We expect gains in the transportation sector. At the other end of the spectrum, the petroleum and coal sector is forecast to have exerted a partial offset. A prospective unwind in several of the durable good categories (machinery & non-metallic mineral products) that had lifted the June figure helps to introduce a downside risk to the on-consensus forecast for the headline series.

The influence of rising prices will translate to a more temperate increase in manufacturing volumes but one that still supports industry-level real GDP in the month of July. This rebound will help lift Q3 annualized growth as the shocks that weighed on the second quarter fade from view.

Foreign Exchange

While we do not expect a large FX market response to the manufacturing sales data. That said, we are increasingly of the view that the recent move higher in USDCAD off the 7 September low (1.2823) is starting to look stretched. Our expectation for some downside risks to these numbers notwithstanding, we are now better sellers of USDCAD rallies ahead of key resistance just below the 1.33 mark. We think risk/reward over the next several days favours a move down toward the lower boundary of spot’s trading range over the last several months.”