[FXJourney]

More bullish on CAD, expecting parity on a 12-month basis, but USD/CAD risk is skewed to the downside even from current levels. The reasons: 1) the global recovery looks better established; 2) the Canadian recovery looks better established; 3)risk-correlated assets is expected to continue to be bought; 4) the tools that the Bank of Canada has available to fight appreciation are increasingly unattractive.

USD selling -- Some risk appetite but also some USD-specific risk
It is pretty clear that risk is being bought globally. Volatility on most currency pairs is declining, supporting carry trades and risk-correlated currencies. Equity prices are at the highs of the year even in the US, and obviously yesterday's US economic data continued a string of strong outcomes. However, we are also seeing gold run up to the year's highs. We would normally view this as either suggesting risk aversion (the earlier high of the year was hit February 20 when the world was in a very pessimistic mood) or the search for USD alternatives. We lean towards the latter. The timing of USD moves yesterday also suggests to us that there is a strong USD-sell component to this move. Equities had started rising from about 10AM, while USD was flat to even rising till the early afternoon and then fell pretty much in straight line that had little to do with equities.