Canadian Dollar: Trade tensions and extended BoC hold – TD Securities

FXStreet Insights Team FXStreet

TD Securities highlights asymmetric upside risk in USD/CAD as US–Canada trade tensions escalate. Section 338 tariffs are expected to shave around 0.3 percentage points from Canada’s Gross Domestic Product (GDP) by 2027, with limited inflation impact, supporting a more extended Bank of Canada (BoC) rate hold. Their models show CAD as a funding currency, and they retain a bearish CAD view with a year-end USD/CAD forecast at 1.39.

Tariffs, carry and CAD funding

"Increased US/Canada trade tension reinforces the CAD's role as a carry funding currency. BoC rate hold could become more extended on the back of the trade deal setback; we also find little near-term catalysts that could push USD/CAD below its 200d SMA at 1.3840."

"Trade tension escalation between US and Canada presents asymmetric upside risk in USD/CAD and reinforces CAD's role as a carry funding currency in FX market."

"From a carry/vol perspective, CAD is now on par with JPY as a global funding currency. While USD/CAD spot price has rallied over the past week, the size of the move still trails below our estimated short-term fair value for this pair."

"MRSI model continues to hold a bearish CAD bias vs global currencies; systematic factors are broadly bearish CAD except for momentum and long-term fair value. We hold a near-term bearish CAD view and maintain 1.39 as our year-end USD/CAD forecast."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.