CAD: Manufacturing sales growth forecasted to slow to 0.3% in September - TDS

Research Team at TDS, expects that the Canadian Manufacturing sales growth to slow to 0.3% m/m in September following the robust 0.9% print in August.

Key Quotes

“Activity should be supported by the transportation sector, where we expect a rebound in aerospace shipments following three consecutive declines and stronger export performance in September. Auto sales are also expected to rise following last month's correction, as strong US demand for light trucks and SUVs underpins Canadian manufacturing. Any gains in the extraction sector will be largely attributable to higher prices as the energy sector appears to have fully recovered from the impact of the Alberta wildfires. We expect prices to be supportive for manufacturing sales as a whole, which should leave the volumes metric little changed on the month.”

“Foreign Exchange

External drivers continue to dominate USDCAD. The Trump tantrum in US rates and uncertainty over trade policies has seen the pair marked a recent high near 1.36. Given the focus on the outlook for US rates and inflation and the composition of the incoming Trump cabinet, we look for local data to remain on the backburner for now. That said, broad USD positioning and valuations are starting to look stretched. Indeed, the USD (BBDXY) is now trading over two standard deviations rich to the level implied from two year rates spreads. This leaves it vulnerable to corrective forces. For CAD, this increases its potential to recover some ground on positive domestic data. Still, we look for shallow and brief dips with strong intraday support near 1.3405.”