Today’s Canadian housing price data will likely disappoint CAD bears once again. Many investors have been calling for a decline in the overvalued housing market to catalyze a move higher in USD/CAD but prices have been growing at a steady 1.4% YoY clip while housing starts average a respectable 191k over the past year. The decline in interest rates, encouraged by both Governor Poloz and global factors, has surely helped support indebted households. Canada has swapped places with the United States in terms of household leverage (Figure 1) but the costs of servicing this debt have fallen sharply since the crisis. CAD bears must wait for higher interest rates before housing becomes a vulnerability for households, banks and the currency.
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