Regional Roundup: Coast-to-coast growth
The latest commentary from Bank of America underscores a broad-based growth trajectory across the U.S. economy, particularly highlighting the South's leading role in new business applications. Per the full note, aggregated credit and debit card spending is on the rise across the nation, with discretionary spending rebounding strongly compared to the past two years. Our desk interprets this as a positive indicator of consumer resilience, which could bolster recovery narratives in currency markets, despite the absence of immediate calendar catalysts to confirm this outlook.
What the desk is arguing
The desk asserts that U.S. economic growth is not only broad-based but also gaining momentum, particularly in the South, which is notably leading in new business applications. According to Bank of America, credit and debit card spending per household indicates a healthy growth rate, suggesting robust consumer confidence.
Specifically, discretionary spending growth has markedly improved compared to the last two years, signaling potential for sustained economic recovery. This contrasts with previous trends where the West outperformed the South, but currently, no region shows signs of a significant consumer slowdown, which is critical for anticipating future currency flows.
Where it sits in our coverage
Our consensus target for USD/CAD is at 1.075 with a range between 1.04 and 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective, emphasizing a stronger outlook, aligns with jpmorgan but sits at the upper end of the spectrum, diverging from bofa, which maintains a more cautious stance.
How other firms see it
Firms like jpmorgan are aligned with our outlook on the currency pair, emphasizing optimism in the U.S. growth narrative, whereas bofa presents a more conservative view, reflecting concerns on sustainability. For traders, keeping an eye on the USD/CAD dynamics will be essential, especially as it can mirror broader U.S. economic health.
In this context, watching the trajectory of employment data and upcoming Federal Reserve sentiments around interest rates will be crucial as they can heavily influence the currency landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01There is broad-based economic growth in the U.S., particularly in the South.
- 02Credit and debit card spending per household indicates resilience and recovery.
- 03Discretionary spending shows significant improvement compared to previous years.
- 04No region is currently facing a meaningful slowdown, supporting a favorable outlook.
Market implications
Traders should look for USD/CAD movement around the range of 1.075, as buying pressure could emerge if growth indicators continue to be robust. Additionally, the upcoming employment data could act as a key catalyst in reinforcing consumer confidence and driving FX sentiment.
Risks to this view
If consumer spending unexpectedly weakens or if significant geopolitical tensions arise, this could reverse the current outlook, prompting a reevaluation of the growth narrative and affecting currency valuations.
~~~~~~~~~~~~~~~ Bank of America ~~~~~~~~~~~~~~~ Regional Roundup: Coast-to-coast growth From spending to wages, growth is broad-based across the US, though the South is the clear leader in new business applications. Bank of America aggregated credit and debit card spending per household is growing at healthy rates across the country. Discretionary spending growth has improved markedly relative to the last two years.
While the West has led recently and the South has lagged somewhat, no region appears to be experiencing a meaningful consumer slowdown. Click below to access our latest publication for a more in-depth look at these insights. You are receiving this email as a subscriber to Bank of America Institute analyses on the economy. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Read the publications, available through the link(s) above, for complete information including important disclosures.
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