TD Securities expects Canada\u2019s Q2 National Accounts to show a rebound from the Q4\/Q1 slowdown, with stronger exports and resilient services activity lifting spending-side growth. The economists see expenditure-based GDP rising 3.5% annualised, versus a market expectation of 3.3%, while industry-level GDP is forecast to increase 0.3% m\/m in June. That compares with a 0.2% flash estimate, pointing to firmer momentum through the end of the quarter.<\/p>\n
They also expect July flash estimates to show continued expansion, leaving Q3 GDP tracking above potential output. Attention later in the week turns to Thursday\u2019s payroll employment report for a final read on June conditions, released alongside the Q2 current account balance. The piece was produced with assistance from an AI tool and reviewed by an editor.<\/p>\n
We expect Canada\u2019s upcoming second-quarter GDP data to reveal a massive rebound to 3.5% annualized growth, largely driven by surging exports and strong services. This anticipated surge is significantly higher than the modest 1.7% growth recorded in the first quarter of the year, signaling a remarkably resilient economy. Consequently, we believe derivative traders should prepare for a stronger Canadian Dollar (CAD) in the coming weeks.<\/p>\n
To capitalize on this momentum, we recommend buying CAD call options or taking short positions on the USD\/CAD pair. Historically, when Canadian GDP outperforms consensus expectations, the CAD typically rallies by 0.5% to 1.2% against the US Dollar within forty-eight hours of the release. With June industry-level GDP expected to rise by 0.3% month-over-month, the bullish case for the currency is highly compelling.<\/p>\n
We also advise traders to adjust their positions in Canadian short-term interest rate futures, as this economic strength will likely force the Bank of Canada to keep rates higher for longer. Yields on Canadian 2-year government bonds historically spike by 10 to 15 basis points following similar high-growth GDP releases that outpace potential output. Selling CAD interest rate futures now allows traders to profit from this impending rise in yields as market rate-cut expectations dry up.<\/p>\n\n\n\n