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USD/CAD to edge higher to 1.3400 6mths - Rabobank

FXStreet (Guatemala) - Jane Foley, analyst at Rabobank explained that although the glut in oil supply may take longer to clear than had been expected at the start of this year, the BoC is optimistic that non-energy exports can pick up some slack.

Key Quotes:

"The weaker position of the CAD should be instrumental in reversing some elements of Dutch disease suffered by non-energy sector industries in recent years and strengthening US demand should also boosting Canada’s economic recovery. BoC Poloz cited at the presentation of the Monetary Policy Report last month that exports of products such as building materials and fabricated metal products have grown strongly in recent months, though no mention was made of the crucial auto sector.

"Although the Canadian economy is still adjusting to the blow stemming from the energy sector, the two interest rates cuts announced this year coupled with the soft tone of the CAD have softened monetary conditions significantly."

"The weaker CAD has lead to an increased in underlying inflation. While this should be largely transitory this supports our view that BoC rates are set to remain on hold for the time being. That said, with the Fed looking likely to start its tightening cycle next month we continue to expect USD/CAD to edge higher towards 1.34 on a 6 mth view."

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