Westpac - "We have taken profit on the USD/CAD leg of our long CAD basket today (Friday) for a 1.2% gain. The trade was entered on 22 May (along with EUR/CAD), motivated by a mix of bullish G10 model signals for CAD and expectations that the Canadian economy was on the cusp of a firm patch. The local data in recent sessions has played up that theme in spades - Q1 GDP rose 2.5% vs 2.3% expected, April building permits rose 10.5% vs -3% expected, the May IVEY PMI rose to 63.1 vs 56 expected and May employment rose 96k vs 15k expected.
Our G10 model is likely to extend is long CAD bias for yet another week - this week's strong data are key inputs into both our data pulse and medium term growth factor signals.
Model signals aside however, market conditions are not conducive to holding macro based trades. FX volatility has risen in lockstep the surge in interest rate volatility in recent weeks. Given the lack of visibility around Fed tapering and the near term direction of JGB yields, FX markets are likely to witness yet more periodic bouts of deleveraging pressures."