Selling USD/CAD will ultimately prove more rewarding trade - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the  BoC has all but killed off any near term chances for USD/CAD to break below its 3 1/2mth 1.26-1.32 range after it adopted an implicit easing bias with the line that, “On balance, risks to the profile for inflation have tilted somewhat to the downside”.

Key Quotes

“But, the USD is wounded and H2 Canadian growth prospects look perky as activity comes back on stream after the Alberta fires and as Trudeau’s fiscal stimulus kicks into gear. A punchy 0.6% rise in June GDP confirms the much hyped recovery from recent wildfires is now well underway.

On balance still feel selling USD/CAD will ultimately prove more rewarding trade amid ongoing stability out of China and a continued dovish tilt from the likes of the ECB, the Fed and the BoJ. But BoC caution suggests sell levels should be set higher, 1.32 instead of 1.30.”