Analysts at TD Securities (TDS) offered a brief preview of the monthly Canadian GDP report, which is expected to show that economy contracted by 0.2% in May. The backwards-looking data is scheduled for release on Friday and might fail to exert any meaningful pressure on the Canadian dollar.

Key Quotes:

“We look for industry-level GDP to decline by 0.1% in May, slightly above flash estimates, due to one-off headwinds to the goods-producing sector from auto retooling and construction. Services should fare much better, helped by the ongoing recovery for the travel sector, and we also expect flash estimates to confirm a moderate rebound (~0.3%) for activity in June.”

“Unless data surprises significantly to the downside, CAD is more deferent to broad USD and risk sentiment rather than lagging data. 1.2780/00 key support for USDCAD.”

“Canada is grinding out outperformance vs the US in a very consistent manner. We feel the 30y auction today may restore the supply-demand imbalance Canada currently finds itself in (relative to the US). Our bias for Canada to outperform the US is due for a pause here after solid gains on the trade. Canada is trading fairly in line with the US post that GDP print this morning, and we will see if that holds after our GDP release and the 30y auction.”