Synopsis:
Goldman Sachs evaluates the likelihood of a 50bps cut by the Bank of Canada (BoC) in November, emphasizing the challenges posed by economic data and labor market softness. They adjust their long USD/CAD position with a new stop and target.

Key Points:

1. Low Probability for 50bps Cut:

   • The probability for a 50bps cut in November is considered low due to the high threshold for positive activity data and recent labor market weakness.
   • A faster cutting cycle by the Fed could influence the BoC’s decisions.

2. CPI Concerns:

   • While CPI is currently less of a focus, continued downside surprises could prompt the BoC to accelerate rate cuts if they align with sluggish economic activity.

3. USD/CAD Positioning:

   • This outlook supports Goldman Sachs’ recommendation to maintain long positions in USD/CAD.
   • They are raising the stop on their trade to 1.35, while reiterating a target of 1.38.

Conclusion:

Goldman Sachs remains bullish on USD/CAD, citing economic conditions that may hinder the BoC from implementing aggressive rate cuts, while also adjusting their trading strategy to safeguard profits.