CAD can continue to outperform on crosses - Westpac

CAD can continue to outperform on crosses, aided by higher energy prices and relatively firm BoC rate pricing, but the broadly supported USD will sustain USD/CAD at the upper end of recent ranges, suggests Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“USD/CAD can trade > 1.30 into mid-year. H2 2018 could see more meaningful USD/CAD weakness, triggered by BoC hikes and an unwinding of CAD undervaluation versus Canada’s firming terms of trade.”

“BoC Governor Poloz spoke May 1 and gave no clues about the timing of their next hike and stressed no need to rush given high household debt. Market pricing heavily favours the July 11 MPR meeting with OIS pricing > 80%. May 30 is seen much less likely though at 30%, probability is non-negligible and probably about as high as one could expect with that meeting still a good four weeks away and mixed data of late.”