Structurally biased toward lower USD/CAD levels - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that they are still structurally biased toward lower USD/CAD levels, despite likely continued elevated risk premiums near term around Brexit.

Key Quotes

“H2 Canadian growth prospects looking decent enough though, as activity bounces back from the Fort McMurray wildfire disruptions and as the Trudeau fiscal stimulus kicks into gear in Q4. Oil prices meanwhile looking more and more resilient with each passing day, flagging that we may be past the low point for the collapse in mining investment too.

USD/CAD more likely to test 1.25 than 1.35 through summer, though the cleaner and more rewarding trade may well be to buy CAD vs the European currencies, even though that will be a consensus trade post the UK referendum.

Nov US presidential election a risk for CAD bulls to watch in autumn, USD/CAD (and USD/MXN) likely favourite hedges if polls tighten given Trump’s antiNAFTA/immigration stance.”