USD/CAD has not participated in the most recent pullback in the USD, despite a more hawkish BoC last week, notes Richard Franulovich, Research Analyst at Westpac.
Key Quotes
“Escalating trade/NAFTA risks clearly the dominant headwind for CAD. NAFTA breakup risk on the rise with US administration signaling a preference to split negotiations and pursue separate deals with Canada and Mexico. Hard to see USD/CAD much below 1.28 near term until NAFTA uncertainty lifts.”
“The BoC delivered a more upbeat message in their statement last week, shedding their customary “caution” regarding future policy adjustments and replacing it with a promise to take “gradual approach”. A 2 nd hike in interest rates this year appears all but certain when they next meet July 11 but much depends on how NAFTA risks evolve in the interim.”
“USD/CAD likely to hold to a 1.27 to 1.30 range near term.”
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