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The collapse in oil prices has weighed heavily on the Canadian Dollar, which has depreciated by 3.1% versus the USD this month and USD/CAD reached its highest level since 2016 yesterday, economists at TD Securities inform. 

Key quotes 

“The BoC presumably welcomes the depreciation in the currency as it will partly offset the short-term disinflationary impact from lower oil prices while also providing a marginal boost for Canada’s export competitiveness if it persists.” 

“If the depreciation in the CAD accelerates we may see the Governor ease off on the pace of rate cuts.”

“We think it would take Lehman like stress to maintain the 1.40 level, though it worth’s noting that a fair amount of stress is priced into CAD on other tools we track.”

“We expect USDCAD to hold a 1.35-1.40 range while markets work the repricing of the new global environment.”


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