CAD: A notable underperformer - Westpac

Richard Franulovich, Head of FX Strategy at Westpac, points out that CAD remains a notable underperformer since the BoC’s more hawkish and determined message Oct 24 when they jettisoned gradualism with a more medium term focus on returning policy back to a neutral stance.

Key Quotes

“The sharp breakdown in energy prices, from 4-year highs less than a month ago to  within sight of fresh 2018 year to date lows is likely among one of the key factors. That is aggravating yet further CAD’s already notable undervaluation vis-à-vis yield spreads (EUR/CAD a notable example).”

“Democrat gains in the midterms unlikely to completely upset NAFTA 2.0, though its path through congress is tougher.”

“Markets continue to underestimate the BoC’s determination to normalise. BoC staff estimates of neutral imply +125bp in BoC hikes versus market pricing for +70bp through to Dec-2019.”

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 securities. 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 Forex 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.