USD/CAD: market tone is dominating, CAD is a growth-sensitive commodity currency - Scotiabank

Ross J Burland FXStreet

Analysts at Scotiabank explained that the CAD is weak, down from Monday’s close and extending its recent decline to fresh multi-month lows, a relative performer among the G10 in an environment of risk aversion and broad-based USD strength.

Key Quotes:

"The market tone is dominating, pressuring CAD as a result of its risk profile as a growth-sensitive commodity currency."

"Oil prices are falling and Canada’s terms of trade are deteriorating. Short-term domestic rate expectations continue to soften and OIS are now pricing in just 5bpts of tightening for May 30, 16bpts for July, while still pricing in one full 25bpt hike by September."

"Measures of sentiment remain remarkably steady however, as risk reversals are already pricing a sizeable premium for protection against near-term CAD weakness."

"Our FV estimate for USD/CAD, using oil prices and the 5Y spread, is now just below 1.2600."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD looks well bid above 1.1600

EUR/USD extends its recovery and climbs back above the 1.1600 mark in quite an auspicious start to the week. Improved risk appetite following the US-Iran agreement to reopen the Strait of Hormuz continues to weigh on the US Dollar, lending support to the risk complex. Looking ahead, investors are likely to remain on the sidelines ahead of Wednesday's FOMC meeting.

GBP/USD climbs to multi-day highs around 1.3460

GBP/USD remains comfortably in positive territory north of 1.3400 the figure on Monday. Cable continues to draw support from an improvement in market sentiment after reports that the US and Iran have reached a framework agreement aimed at ending the conflict and reopening the Strait of Hormuz.

Gold extends the recovery, targets $4,400

Gold rallies on Monday and climbs well above the $4,300 mark per troy ounce. The precious metal benefits from renewed selling pressure on the Greenback as investors reassess the implications of the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Market participants now turn their attention to Wednesday's FOMC gathering.