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CAD downside looks limited – Danske Bank

FXStreet (Edinburgh) - Senior Analyst at Danske Bank Christin Tuxen expects the Canadian dollar recove some ground in the medium to long run.

Key Quotes

“Canada is in an adjustment process amid a new lower oil price environment and a weaker CAD is a key element in this”.

“The 2015 rate cuts show that the BoC has no problem easing monetary policy at a time when the Fed is moving in the opposite direction and this ‘risk’ points to some further upside in the cross near term”.

“However, the market is already pricing in a small chance of another cut, which we do not see materialising, and this limits outright CAD downside”.

“With oil bottoming out and the US domestic growth outlook still decent, we think the pace of USD/CAD appreciation will slow beyond the first Fed hike in December”.

“Further out, we see the cross stabilising, driven by a gradual oil recovery, the BoC staying on hold in 2016, and a shallow Fed hiking cycle. We leave our forecasts unchanged”.

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