Canadian Dollar May Hang Tough Against a Hawkish Fed

Canadian Dollar May Hang Tough Against a Hawkish Fed

Fundamental Forecast forCAD:Neutral

Talking Points:

  • Big Week For Canadian Data With Retail Sales, CPI GDP Ahead
  • Steepening Yield Spread Among US/CA Debt, Largest USD/CAD Upside Risk
  • USD/CAD Technical Analysis: Strong Reversal Puts Downtrend In Doubt

The Canadian Dollar enervated opposite a USD as did a rest of G10FX when a Federal Reserve signaled a some-more hawkish/ steeper dot tract than expected. The Canadian Dollar had Bullish movement subsidy it going into a assembly on a behind of a Dec 7 Policy Statement where a Bank of Canada remarkable that they are focusing on tardy that stays in a Canadian economy and wanting a “at present” word when deliberating probable rate cuts to kindle a economy.

The subsidy off of dovish process by a Bank of Canada unhappy many Canadian Dollar bears. However, when looking during a determined relations month-over-month strength in a appetite marketplace and EM stability, whichdoessignificant trade with Canada, it’s easy to see because a Bank of Canada is subsidy off a assertive dovish stance.

Last week, we saw an hapless multiple for CAD Bulls of a constrained topic for serve US dollar strength alongside unsatisfactory Canadian prolongation sales that were disastrous again in October. However, subsequent week will benefaction a vast slew of information for Canadian Dollar traders to cruise into a New Year. While few are awaiting fireworks regarding certain surprises for Canadian data, a imitation in-line with expectations would continue to see a Bank of Canada holding put as against to seeking easing policy, that might keep CAD bid in non-USD crosses.

Wednesday will benefaction Wholesales Trade Data for a month of October, while Thursday Friday produce a title prints for a Canadian economy. Thursday will produce Retail Sales for Oct a all-important CPI for November, that is negligence streamer to and might eventually print above a Bank of Canada’s 2% aim with a fortitude in Crude Oil. Friday will benefaction GDP for October, with YoY approaching to sojourn unvaried during 1.9%.

Canadian Dollar Traders should continue to keep an eye on widening or squeezing produce differentials. The Bank of Canada is doing their pursuit in gripping a CAD stable, though sensitivity in emperor yields will expected be a motorist over a entrance months.

Energy Effect Favoring CAD Stability

Crude Oil is personification a vast role in what could be a resumption of a Canadian Economy. As mercantile information is stabilizing (disappointing reduction often), a Bank of Canada is branch some-more neutral as against to dovish, and a Crude marketplace looks staid for a fortitude above $50/bbl. All of this total with a Fiscal efforts by PM Trudeau might concede a Canada to advantage severely from a new OPEC settle to extent wanton prolongation to support a market’s supply balance.

While risks sojourn given a uncertainty of destiny U.S. trade policy, a Canadian Dollar might gleam as a customer of a healthy trade partner with a U.S. and a branch of a waves in appetite markets that continues to play out.

About author