CAD under the threat of rising global/NAFTA trade tensions - Westpac

Q1 saw CAD pummelled by the two-pronged threat of rising global/NAFTA trade tensions and a more cautious Bank of Canada as USD/CAD has now eased more than 2.5% from its highs but continues to overstate both threats, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

 “The Trump administration has softened a key demand regarding regional car and car parts content in the rush to secure a quick near term symbolic victory before US midterm elections and Mexican elections stymie progress.”

“BoC pricing has firmed a touch lately, from a low of around +44bp to 50bp by year’s end, but it remains heavily back loaded into the second half of 2018 – the first 25bp is not priced in until August. Against that, the latest wage and inflation updates continue to track in line with BoC projections and our Canada surprise index warns negative sentiment is overdone too.”