The CAD has recovered all of the ground lost to the USD during the early phases of the COVID-19 lockdown but economists at HSBC believe the drop in USD/CAD has more to do with USD disdain than CAD enthusiasm. The Canadian dollar remains vulnerable to a still challenging economic outlook and the political outlook in Canada also seems uncertain. The economists retain a bearish bias toward the CAD.
“The difficulty for the CAD is where things go from the post-lockdown bounce in activity. The government support programmes are set to be tapered and then end. Canada has less room to manoeuvre on the fiscal front than some others in the G10, before that cyclical or structural trade-off becomes more of an issue for FX.”
“Political uncertainty could also rise in Canada. Parliament will return when the current proroguing ends on 23 September, and the government announces its new long-term economic plan. It will also allow committees investigating links between the WE Charity and Prime Minister Trudeau and the former finance minister, Bill Morneau, to resume their work (BBC, 20 August 2020).The Liberal Party governs with a minority of parliamentary seats.”
“All in all, our bearish view on the CAD appears not to have been shared by the market, but we remain cautious on the CAD and still look for USD/CAD to rise, albeit at a gradual pace.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.