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FxWirePro: Discover RV edge, Trios to pair CAD longs against Swiss franc

The BoC was the first central bank to pivot in a more dovish direction in the summer. But after delivering its second successive rate hike in October and signaling a greater data dependency, rate expectations have corrected somewhat. The recent labor data should provide some renewed impetus to the tightening cycle as wage growth moved up to 2.4% oya compared to 0.7% only six months ago.

Admittedly the CAD curve discounts two hikes next year but thereafter it is pretty flat, so there’s scope for the longer-dated term premium to increase on evidence that labor slack is not as great as the BoC believes.

While the SNB maintains its view that the CHF is "highly valued", as the situation remains "fragile". The expectation continued vigilance from policymakers even as EURCHF 1.20 looms.

We pair CAD vs CHF because:

1) We want to avoid an outright USD short,

2) We are not comfortable adding to existing JPY shorts given the possibility of trade tensions during Trump’s Asian tour, and

3) The demand for Swiss franc funding is likely to persist in a more reflationary global environment in which the SNB is content to sit on its hands. Swiss CPI is released on Monday – this is already at a 6-year high and above the 20Y average, but optically it is hard to get excited about inflation that is still below 1%. There is a modest RV edge to CADCHF as the cross is around 1%, or 1-sigma, cheap on a high-frequency model (refer above chart). Courtesy: JPM

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November 24 15:30 UTC Released

USECRI Weekly Index*

Actual

145.6 %

Forecast

Previous

145.6 %

November 24 14:45 UTC Released

US1st Half-Mth Infl YY*

Actual

54.6 %

Forecast

Previous

54.6 %

November 27 09:00 UTC 29612961m

ITExport Prices*

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Forecast

Previous

111 %

November 27 09:00 UTC 29612961m

ITImport Prices*

Actual

Forecast

Previous

116.1 %

November 27 14:00 UTC 32613261m

MXTrade Balance, $*

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Forecast

Previous

-1.886 Bln USD

November 27 14:00 UTC 32613261m

MXTrade Balance SA*

Actual

Forecast

Previous

-1.559 Bln USD

November 27 15:30 UTC 33513351m

USDallas Fed mfg bus index

Actual

Forecast

Previous

27.6

November 27 21:00 UTC 36813681m

KRBOK Manufacturing BSI*

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Forecast

Previous

87 Bln BRL

November 28 00:00 UTC 38613861m

BRCentral Govt Balance

Actual

Forecast

Previous

-22.725 Bln BRL

November 28 07:00 UTC 42814281m

DEGDP Growth QQ* Advance

Actual

Forecast

Previous

10.7 %

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