BoC’s Q2 Business Outlook Survey showed a marginal improvement

The Bank of Canada's Q2 Business Outlook Survey showed a marginal improvement from Q1 but was still overall very soft on all fronts. Machinery & equipment investment intentions remain very weak, rising just slightly to 7.0 from 4.0 (compared to a 2014 average of 18.0); employment intentions ticked higher but are still weaker than through most of 2014 (to 26.0 from 20.0 in Q1, vs. a '14 avg. of 37.0); and inflation expectations softened. 

The big question is what it means for the BoC decision next week, and the market has taken this as a slight increase in the chance of a cut-pricing in another 1-2bps. That leaves pricing near 40-50% for a 25bps cut on July 15. That makes sense given that this report doesn't seem to offer a clear trigger for the Bank, so expectations remain on the fence. With merchandise trade data tomorrow and employment Friday, there is still potential for greater pricing of a cut, though, and that should leave CAD on the defense-for this week at least.