USD/CAD near session lows ahead of budget

Author: Adam Button | Category: News

Author: Adam Button

At the top of the hour, Canada will release its annual budget. It’s the first budget for the recently-elected Conservative majority and is being called a “legacy budget”

Of interest will be deficit forecasts. In November, Fin Min Flaherty forecast a C$31 billion deficit for the fiscal year ending this week but there is speculation it could be as low as C$20-26 billion. A lower number would boost CAD.

Cuts of $4-$6 billion annually are expected to be phased in. A higher reading could hurt CAD on growth concerns.

Raising the pension age is the big story in Canada but will not affect CAD. Measures to cool the housing market would be CAD negative. No major (or even minor) taxation changes are expected. There is some scope for surprise measures because the government runs a fairly secretive operation.

Also, after the US closing bell, Research in Motion will also release quarterly results. On the slim chance that the company announces a takeover, or even that it’s exploring a takeover, CAD would surge.

On balance, I prefer USD/CAD shorts heading into the announcements but I my preferred trades is to short any strength.