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25 Feb 2014
Flash: USD/CAD medium term risks - BMO Capital Markets
FXStreet (Barcelona) - Stephen Gallo, European Head of Currency Strategy at BMO Capital said that medium-term downside CAD risks still dominate.
Key Quotes:
"Medium-term downside CAD risks still dominate, but the appetite to aggressively add to CAD shorts above 1.095-1.100 should remain limited for now. January CPI suggests some pass-through from the weaker CAD is already in play, and expectations for BoC rate cuts during the remainder of the year are basically nil again, according to the OIS curve."
"This is probably because weather has played a very big role in recent Canadian data weakness. More time will be needed to determine which portion of the weakness is due to the weather, and which is not."
"Additionally, Canadian equities have outperformed their US counterparts so far this year, and the oil price still says the CAD is moderately undervalued. We currently look for very good resistance in USD/CAD at 1.113-1.115 to persist through the GDP data on Friday."
Key Quotes:
"Medium-term downside CAD risks still dominate, but the appetite to aggressively add to CAD shorts above 1.095-1.100 should remain limited for now. January CPI suggests some pass-through from the weaker CAD is already in play, and expectations for BoC rate cuts during the remainder of the year are basically nil again, according to the OIS curve."
"This is probably because weather has played a very big role in recent Canadian data weakness. More time will be needed to determine which portion of the weakness is due to the weather, and which is not."
"Additionally, Canadian equities have outperformed their US counterparts so far this year, and the oil price still says the CAD is moderately undervalued. We currently look for very good resistance in USD/CAD at 1.113-1.115 to persist through the GDP data on Friday."