“Both Australia and Canada are commodity exporters adjusting to a sharp downturn in commodity prices. Since it peaked in March 2013, trade-weighted AUD has fallen by 21%. Over a similar time period, trade-weighted CAD is down by a similar amount (-24% since Sept 2012). Despite the sharp currency depreciations, non-commodity exports have been slow to materialize.”
“Nevertheless, in Canada there are signs that noncommodity exports are beginning to pick up and Canada is gaining market share in global trade, while in Australia, noncommodity exports are still lagging. In the first half of 2016, short AUD/CAD could also feel the benefit from a weather phenomenon – El Niño. A strong El Niño is growth enhancing for Canada and negative for the Antipodeans. Short AUD/CAD may be helped at the margin by diverging fiscal policy. The new Canadian government plans on running small fiscal deficits over the next two years while Australia reduces its cyclically-adjusted fiscal deficit further.”
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