FxWirePro: USD/CAD ATM vols tepid despite likley rebound housing starts and BoC meeting

The better-than-expected economic turnout in Canada in the end of the year is likely to keep the Bank of Canada on hold at next week's interest rate decision.  (GDP growth by 0.2%, increased Canadian national accounts by 0.8% (annualized) gain in Canadian real GDP in Q4, Real exports in January grew 2.5%).

While on the other hand, Canadian housing start numbers are flashing shortly, the new residential buildings should see a restrained rebound in February, with the pace of housing starts increasing to 177k.

The pickup in building activity will be driven by the more volatile multifamily segment which reached a 12 month low in January.

On a regional basis, construction growth will be most prominent in Ontario and British Columbia, while Alberta will suffer from continued layoffs in the oil and gas sector and a glut of new housing projects currently underway.

The implied volatility of ATM contracts for near month expiries of this the pair is at around 10.35%. With many clients forced to grapple with this volatility, our efforts to conclude whether the risks to USD/CAD are symmetric or asymmetric in nature with respect to various valuation metrics.

Well, despite the announcement of all these significant economic event's CAD's vols is in declining trend which is good news for option writers.