6 Aug 2015
Further strength lies ahead for USD/CAD – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, expects the pair to extend its upside bias in the near term.
Key Quotes
“The combination of the BoC’s July rate cut and the recent dip in oil prices has resulted in the CAD being the second worst performing major currency over the past month (the AUD has fared even worse)”.
“Even though we are not pencilling in another BoC rate cut at this point, we do see risk of USD/CAD pushing higher from current levels in the coming months”.
“Concerns about the vitality of business investment in the US and the recent drop in US consumer confidence combined with concerns about Chinese growth all support our view that the FOMC will favour December over September to start normalising rates”.
“While a later start to Fed rate hikes could subdue the appetite of USD bulls, a tightening Fed is still consistent with a broad-based uptrend in the USD in the coming months. While the BoC is optimistic about the ability of non-energy industries to capitalise on the weakness of the CAD and lead the economic recovery later this year, the issue of oversupply of oil could weigh on the Canadian economy well into 2016”.
“We have recently revised lower our short-term projection for oil prices and this bodes poorly for the outlook for the resource sector and the CAD”.
“The current lack of synchronization between the US and Canadian economies suggests it could be some time before the BoC follows the Fed with higher rates. A widening in interest rate differentials into 2016 is set to weigh on the CAD versus the USD”.
Key Quotes
“The combination of the BoC’s July rate cut and the recent dip in oil prices has resulted in the CAD being the second worst performing major currency over the past month (the AUD has fared even worse)”.
“Even though we are not pencilling in another BoC rate cut at this point, we do see risk of USD/CAD pushing higher from current levels in the coming months”.
“Concerns about the vitality of business investment in the US and the recent drop in US consumer confidence combined with concerns about Chinese growth all support our view that the FOMC will favour December over September to start normalising rates”.
“While a later start to Fed rate hikes could subdue the appetite of USD bulls, a tightening Fed is still consistent with a broad-based uptrend in the USD in the coming months. While the BoC is optimistic about the ability of non-energy industries to capitalise on the weakness of the CAD and lead the economic recovery later this year, the issue of oversupply of oil could weigh on the Canadian economy well into 2016”.
“We have recently revised lower our short-term projection for oil prices and this bodes poorly for the outlook for the resource sector and the CAD”.
“The current lack of synchronization between the US and Canadian economies suggests it could be some time before the BoC follows the Fed with higher rates. A widening in interest rate differentials into 2016 is set to weigh on the CAD versus the USD”.