Canadian Dollar Reactions Fuel Market Selling Pressure

The Canadian dollar saw a reaction to the flat July GDP print from TD Securities, but it's not entirely clear why. Despite the underwhelming nature of the report, markets began selling off again after the release.

This move is primarily concentrated in the front to mid-curve of the market, with no change in Bank of Canada pricing following the print. The front-end curve is particularly under pressure.

According to TD Securities, while they disagree with the fundamentals behind selling off on such a weak report, the reaction aligns with recent positioning washouts. They also point out that this move is focused mainly in the front to mid-part of the curve, as Bank of Canada pricing remains unchanged post-print.

The cross-market move was subdued, with US yields hovering around key technical levels. TD Securities continues to be biased towards 1y5y-1y2y steepeners for a front-end view and is cautiously adding 2-year long positions.