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Richard Franulovich, head of FX strategy at Westpac, points out that while CAD is the strongest currency against the USD so far in 2019, CAD has not fully capitalised on those positives in the last three months.

Key Quotes

“The bulk of CAD’s outperformance occurred in H1 2019 but yield spreads have pointed to ongoing outperformance in Q3.”

“Trade tensions and slowing global growth account for the bulk of the decoupling from yield spreads and as the slide over suggests, that is worth at least US5 cents.”

“The rebound in domestic activity has run its course but any moderation likely still leaves activity advancing close to trend, in line with BoC expectations. Against that backdrop the BoC will remain sidelined and another leg of CAD outperformance is on the cards. Sell USD/CAD into 1.34.”