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The Canadian Dollar dropped on NAFTA concerns but recovered on upbeat GDP figures. What’s next?

Here is their view, courtesy of eFXdata:

CIBC Research discusses  CAD outlook in light of the oil prices and NAFTA developments.

“The Canadian dollar appears cheap vs its previous trend with oil prices. And based on the divergence between CAD and its linear trend with WTI prices, the gap still appears to be elevated in the 6-7 cent region. That could reflect ongoing trade uncertainty. However, it could also reflect the fact that Canadian firms are seeing an increasingly large gap between global prices and what they can sell their oil for, with the WCS-WTI gap having widened further, Indeed, doing the same analysis of CAD vs WCS shows little undervaluation at all,” CIBC notes.

While a resolution to NAFTA uncertainty would likely lead to a short-term boost for the loonie, it’s likely to be more in the 2-3 cent range rather than 6-7 implied by its relationship with WTI,” CIBC adds.

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