According to Richard Franulovich, head of FX strategy at Westpac, USD/CAD’s new year decline to 1.30 has probably run its course and fresh catalysts for an continuation move lacking.

Key Quotes

“BoC Dep Governor Lane characterised recent weakness as a “temporary soft patch”, but showed no rush to resume hikes (next BoC event risk not until 21 Feb, Gov Poloz speech).”

“The run-up in oil in the new year from $45 to $55 appears to be cresting and the discount on Western Select has narrowed about as much as can be expected after earlier mandated Alberta production cuts.”

“There is a non-negligible risk the BoC dials back its tightening bias at some point, given recent Fed, ECB and RBA dovish shifts, but would not regard it as a base case.”

“Canada’s growth picture looks far more secure than either Eurozone, the UK or Australia and the BoC will remain relatively more hawkish than other G10 central banks. CAD to be a 2019 outperformer.”

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