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Credit Agricole: CAD hitching a ride – eFXnews

FXStreet (Barcelona) - The eFXnews team note Credit Agricole highlighting the reason behind CAD’s performance over the past month.

Key Quotes

“First, we note the leverage to US growth. The US economy grew at a 3.9% annualized clip in Q3 and bar the weather-induced slump in Q1 2014 growth has averaged over 4% the past year. The forward looking guidance from less volatile, high frequency data underscore that the US economy is steadily humming above its potential. Given its proximity and trading links this has spilled over to Canada’s economy. “

“Second, the pickup in growth has fed into prices. For instance, CAD’s sharp decline in H1 2014 was driven largely dovish BoC rhetoric amid concerns about persistently low inflation. Q1 2014 marked the low in inflation and since then both the core and headline have gradually moved higher through 2014. We suspect the recent decline in oil prices has weighed on CAD but macro fundamentals support CAD on the crosses.”

“We still hold a short NZD/CAD in our model portfolio and also maintain a strong conviction that cross should continue to move lower. The trade is up 0.5% and we target a move to 0.8385 in the coming months.”

This content has been provided under specific arrangement with eFXnews.

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