Strategic outlook for CAD has shifted considerably to downside – TD Securities

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“The strategic outlook for the CAD has shifted considerably to the downside. This follows a deeper slowdown to growth in H2-2018 and a near-capitulation by the Bank of Canada,” note TD Securities analysts.

Key quotes

“Indeed, we now think the BoC has marked an end to its tightening cycle. If policymakers move this year, it is more likely to be a cut.”

“The global backdrop remains an important driver for the CAD. It is now clear, however, that the domestic economy has a real problem on its hands. We highlight the areas of concern. These should sustain broad CAD weakness going forward. Note that we are already short CAD on crosses.”

“We have revised our forecast higher for USDCAD. We see persistence around the 1.36 level this year. Despite this, we nonetheless think that the balance of risks implies that the pair will spend much of its time this year in a broad 1.35-1.40 range.”

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