A notable laggard amid USD weakness

16 February, 2018

CAD remains a notable laggard amid sustained USD weakness, close to unchanged vs the USD 2018 YTD vs more meaningful gains for JPY (+5.3%), NZD (+3.9%) and EUR (3.7%), explains Richard Franulovich, Research Analyst at Westpac.

“NAFTA renegotiation risks are seemingly a factor at play but that doesn’t gel with MXN ranking as the strongest G20 currency vs the USD YTD.”

“Canada has weathered +75bp in BoC hikes in six months without too much fuss, financial conditions have not tightened unduly either, a perennial concern for BoC officials (see over) and growth expectations in the US are solidifying amid stronger wages and very accommodative fiscal policy. OIS pricing for +44bp in BoC hikes by their Oct MPR is if anything on the light side.”

“CAD likely plays catch up to the solid story above at some point, USD/CAD more likely to test 1.20 on a 6 month horizon before 1.30.”


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