G10 – Buy CAD/CHF: FXWW

From the FXWW Chatroom: We continue to like tactical CAD longs, particularly against low-yielding currencies like CHF. With the BoC’s Business Outlook Survey pointing towards strong investment trends and building inflationary pressures, and Canadian data tracking broadly in line with the BoC’s outlook, our economists expect the BoC to deliver a rate hike at their meeting this week. This would strengthen CAD as markets are only pricing 12% probability of a hike this week. Should the BoC choose not hike this week, they are likely to strike a hawkish tone to keep a July rate hike in play, which would keep CAD supported as well. In addition, constructive news over NAFTA negotiations should also continue to allow a re-pricing of the trade risk premium in CAD. CHF should stay on the back foot given our expectation for a risk rebound, with SNB policymakers including Maechler and Moser suggesting the central bank will remain cautious for the time being. The risk to the trade is a dovish shift from the BoC, leading to CAD weakness.

We like to buy CAD/CHF at market with a target of 0.79 and stop of 0.75

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