CAD: Healthier background continues to form - Westpac

Richard Franulovich Head of FX Strategy at Westpac, notes that the USD/CAD’s push lower below 1.3000 has stalled, yet a healthier background for CAD continues to form.

Key Quotes

“The diplomatic spat with Saudi Arabia is unlikely to have a meaningful spillover macroeconomic impact.”

“The push for renewed NAFTA talks are gaining momentum; US Trade Rep Lighthizer raised the prospect of a tentative deal in principle by end-August, rather than 2019. Lighthizer was specifically referring to US-Mexico negotiations, though any bilateral deal would likely give considerable impetus to US-Canada talks.”

“Solid May GDP figures, a much smaller June trade deficit and still elevated July PMIs point to solid growth momentum for Canada through Q2 and into Q3.”

“BoC appears on track to hike Sep 5. Downside risks for USD/CAD near term loom larger especially if a quick NAFTA deal is reached.”