The CAD has been in demand for most of the last few days, mainly on the back of better than expected housing and manufacturing sector-related data, as well as rebounding commodity prices.
However, we still expect the currency to remain subject to downside risk, in particular against the USD.
First of all, the most recent data does not indicate considerably improving growth prospects. On the contrary, still weak labour market conditions should keep inflation subject to downside risk unless commodity prices rebound more sustainably. However, in the absence of sustainably improving global business activity, commodity prices should remain at risk of weakening anew.
This in turn suggests that there is further room of diverging Fed-BoC monetary policy expectations to the benefit of USD/CAD. We remain long the pair from 1.2485 targeting 1.3050.
However, we still expect the currency to remain subject to downside risk, in particular against the USD.
First of all, the most recent data does not indicate considerably improving growth prospects. On the contrary, still weak labour market conditions should keep inflation subject to downside risk unless commodity prices rebound more sustainably. However, in the absence of sustainably improving global business activity, commodity prices should remain at risk of weakening anew.
This in turn suggests that there is further room of diverging Fed-BoC monetary policy expectations to the benefit of USD/CAD. We remain long the pair from 1.2485 targeting 1.3050.
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