Francesco Pesole, FX strategist at ING, suggests that a possible re-escalation in trade tensions between the US and China indeed has the potential to dampen appetite for risk-sensitive currencies such as CAD.
“We expect the mix of factors to provide some support to the currency, keeping any upside in USD/CAD limited.”
“We forecast that the recent downward pressure on the currency pair will resume in 4Q19, when we expect trade tensions to abate, crude prices to peak and US-Canada policy divergence to linger.”
“Accordingly, we do not exclude another upward move in the CAD positioning indicator towards the end of the year, when USD/CAD should start to test the sub-1.300 area.”
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