Commodity currencies are vulnerable to a pullback - BNPP

In view of the analysts at BNP Paribas, with commodity bloc rates markets increasingly priced for tightening later in 2017/early in 2018, these currencies remain vulnerable to any pullback in global growth optimism or a significant correction in commodity prices.

Key Quotes

“Overnight, Australia November retail sales data was softer than expected and ahead today Canada reports December housing starts and November building permits. In China PPI came out stronger than expected (5.5% y/y vs 4.6% expected, see here for more details). As it is a significant driver of global CPI, it should keep focus on the reflationary environment.”

“The Bank of Canada’s Business Outlook Survey showed a surge in expectations on investment, sales, and hiring to their highest level since before the 2014 oil collapse. The data follows a strong jobs report from last Friday and has seen rate markets further reduce pricing for near-term easing risk.”