CAD driven by positive news flow - BBH

Analysts at BBH explain that the positive news stream in Canada has sent the Canadian dollar to levels not seen in a couple of years (above $0.80).  

Key Quotes

“The surge in May's GDP (0.6% for a 4.6% year-over-year pace) reinforces ideas that the Bank of Canada will take back the other cut that it provided for support in 2015, having taken the first back earlier this month.  Canada reports June trade balance and July employment at the end of next week.”

“Employment surged in June, and a more subdued pace is expected (~10k).  Growth differentials and the terms of trade warn of downside risks of Canada's trade balance.  Widening of trade deficit may not be negative for the Canadian dollar because it would increase the likelihood of a hike in Q4 (October?).  Extrapolating for the OIS, there appears to be a little more than a 50% chance of a hike discounted.  Since the day before the July 12 rate hike, the December the implied yield of the December BA futures has risen by 14 bp to 1.51%, which is where it finished last week.”