CAD softens as broad USD strength caps upside – Scotiabank
|The Canadian Dollar (CAD) is edging lower in tandem with its peers as the US Dollar (USD) firms into the end of the week, though downside pressure remains contained. Softer oil prices and a cautious risk backdrop are mild headwinds, but tightening front-end swap spreads continue to anchor the CAD near fair value, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
USD/CAD tests top of weekly range near 1.38
"The CAD is drifting a little lower, in line with its peers as the USD gains broadly. A cautious risk mood and still soft crude prices remain minor headwinds for the CAD but some additional spread compression, driving the 2Y swap spread to around 75bps, should act as an anchor for the CAD. The swap spread is the narrowest since Oct 2024. Spot fair value is estimated at 1.3805 this morning."
"PM Carney remarked that chances of a sectoral agreement on tariffs were now unlikely and that trade discussion will likely roll into a broader review of USMCA next year. "
"Spot gains are testing the upper reaches of the past week’s trading range. The USD will likely close out the week with a net gain, the first in a month, but it’s not obvious that the rebound is strong enough to extend further into next week. A clear move above 1.38 would suggest some potential for the USD recovery to extend to the mid/upper 1.38 area but perhaps not much more. Support is 1.3760/70 ahead of 1.3725/50."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.