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CAD facing challenges ahead - TD Securities

FXStreet (Barcelona) - Shaun Osbourne, Chief FX Strategist at TD Securities explained that falling commodity prices represent a further challenge for the CAD in the medium-term.

Key Quotes:

"In a weak USD environment broadly yesterday, energy prices under-performed quite obviously; usually, the big dollar and commodities work against each other. But WTI dropped back under USD90/bbl and continues to trade heavily amid supply worries and further concerns about growth trends ex-North America after the IMF downgraded global growth forecasts for 2015 (whilst nudging up the 2014 outlook for the US)."

"More crude inventory building in today’s EIA data could pressure oil prices further near-term. WTI’s loss of support around USD91/bbl implies more scope for weakness in price in the medium-term (potentially towards the low USD80s), we think."

“Firstly, lower raw materials prices are usually reflected negatively in Canada’s terms of trade, which works against the CAD. And secondly tumbling prices and high costs will squeeze marginal producers and may curb investment in the oil patch, representing another hurdle to the long-awaited rotation to trade an investment-led growth that the BoC has stated is vital for the growth outlook."

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