Headlines continue coming out of Algiers, but so far, our speculation of a no-deal is crystallizing. The various members are not getting closer to an agreement despite more goodwill than back in April, ahead of the Doha meeting. The Russian delegation has left, and even if Iran and Saudi Arabia strike an accord, this may not be enough. The team at BNP Paribas assess the impact for the Canadian dollar:
Here is their view, courtesy of eFXnews:
OPEC ministers gather for an informal meeting in Algiers on Wednesday afternoon. Our commodity strategists continue to view an announcement of significant new cooperation measures as unlikely, but with market expectations also running low heading into the event, particularly after comments from the Saudi minister on Tuesday downplaying scope for a deal, negative reaction in crude prices would probably be limited.
In contrast, a surprise agreement to freeze prices would likely lead to significant crude gains short-term, even if this would merely lock in an unsustainably high level of overall production.
The CAD underperformed notably on Tuesday, with last week’s soft Canadian data continuing to weigh on Canadian rates and the currency. However, USDCAD was unable to sustain a break of its 200-day moving average at 1.3239, and the current environment of very low US real yields means commodity exporter currencies like the CAD are likely to hold up well vs. the USD.
We target USD/CAD at 1.30 near-term.
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