The Canadian Dollar (CAD) has found a modest bid on the coattails of its commodity cousins even as President-elect Trump repeated his threat to impose huge tariffs on Canada, Mexico and China in his first major TV interview which aired over the weekend. Scope for CAD gains is limited, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
CAD firms modestly
“Despite a solid-looking gain in November jobs, there were enough holes in Friday’s labour market report (government jobs drove the full-time gain, wage growth slowed and—chiefly—the unemployment rate rose) to support expectations that the Bank of Canada will cut its policy rate 50bps this week. Markets are close to fully pricing in a 1/2-point cut (46bps) so the outcome may not weigh on the CAD significantly.”
“There is likely to be limited room for the CAD to rebound around the BoC decision unless the Bank opts for a smaller ease or signals a more cautious outlook for policy amid developing uncertainties. Intraday price action is tilting somewhat CAD-bullish. The CAD sold off into the end of last week, retesting the late November peak at 1.4178 in effect.”
“The USD has formed a bearish outside session on the 6-hour chart through European trading, however, suggesting a minor peak is in and that the CAD might improve a little more. Still, USD-bullish trend momentum signals are aligned across the short-, medium– and long-term DMIs which means limited scope for USD corrections (perhaps only to the 1.4025/50 area in the short run) and ongoing pressure for USD strength.”
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