Election day is today and everything is ready. Here is our full guide, video guide, and all the updates. And here is the view from Credit Agricole on the Canadian dollar.
Here is their view, courtesy of eFXnews:
We expect the CAD to be quite sensitive to the outcome of the US presidential elections given the very close links between the two economies and the importance of the US for Canadian exports.
To the extent that Trump has consistently targeted the NAFTA trade agreement during the campaign, we believe that his win next Tuesday would put CAD under immediate pressure, especially as the currency is not pricing in a significant risk premium, unlike the MXN (78% of Canadian exports go to NAFTA countries).
In case of a Clinton win, the CAD should get some temporary support but we would be inclined to fade any strength. While BoC Governor Poloz has been sending mixed messages recently we continue to see the risk of a cut as larger than the risk of a hike over the next 18 months.
Admittedly, a resumption of the Fed tightening cycle would likely keep the BoC on the sidelines, but that would still be consistent with interest rate differentials favouring USD/CAD upside. The CAD’s correlation with oil has not been very reliable of late, but with the OPEC production cut deal crumbling it’s clear that oil prices will not be much of a tailwind for the loonie.
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