BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
ECB Signals Steady Interest Rates as Fed Risks Loom Over Outlook 
2025 Market Outlook: Key January Events to Watch 
New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
Along similar lines of EURUSD, we also like EUR call/CAD put flies.
The macro view on CAD is negative on a mix of BoC dovishness, sensitivity to NAFTA renegotiation talk which is likely to re-enter headlines over the next few weeks, and the potential for further near-term slippage in oil prices.
We introduce a Bank of Canada rate hike forecast for 3Q18 but would need to see a shift in tone to move it forward
Despite a strong run of Canadian data, the Bank of Canada has retained a dovish tone in its communications in recent months. This week continued that pattern, with Governor Poloz reiterating his belief that the Canadian output gap remains large, but January GDP subsequently surprised strongly to the upside. Our nowcaster now looks for 4.8% SAAR GDP growth in 1Q; we raise our forecast to a more cautious--but still robust--3.8%.
Hence, option pricing heavily favors EUR call/CAD put fly ownership, which are near 3y lows in premium (refer above chart).
2M 1.46 – 1.49 with 1.52 RKI –1.52 EUR call/CAD put flies indicatively cost at 35 bp EUR (spot ref. 1.4260, max payout ratio 5.8 times if RKI triggered, 11.4 times if not).
