By FXEmpire.com
Outlook and Recommendation
The USD/CAD continues to weaken trading at 1.0332 as risk aversion supports the USD and the drop in crude prices hurts the CAD.
The escalation of the European crisis and the deterioration in the outlook for global growth has proven a difficult combination for financial markets. The month of May was marked by a significant jump in risk aversion and safe haven bond prices; while most other assets suffered significant losses. The Canadian dollar (CAD) lost 4.5% against the USD; however it performed relatively well against most of the other currencies, gaining 1% against GBP, 2% against AUD and EUR and 5% against MXN.
Spikes in risk aversion are typically violent but temporary; however the retracement is renowned for being slow. The near-term outlook for CAD has also been revised lower, expecting it to weaken into quarter-end; potentially falling to 0.95, but in the medium-term CAD should prove a favored currency and rally into year-end. Once risk aversion and the rapid flow into US dollar denominated assets subside, the outlook for CAD should brighten. The medium term interest rate outlook favors CAD as the Bank of Canada is likely to hike interest rates long before the Fed, the ECB or the BoJ, who all face more significant domestic headwinds. In addition, even though there has been some dampening in the expectation for Asian growth, it is still expected to generate historically strong demand for commodities, which prevents a collapse in most commodity markets. Nevertheless, the forecast for both WTI and Brent has been revised lower; but the spread (important due to the pricing of Canada’s petrol exports versus imports) is expected to narrow in Canada’s favor. In addition, lower oil prices will prove positive for global growth, particularly the US, somewhat offsetting the ‘Europe effect’
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.
Central Bank Name: Bank of Canada
Date of next meeting or last meeting: Jun 05
Current Rate: 1.00 % (+ 0.25) At the time of this writing the BoC has met and held rates.
Statement highlights of last meeting: The Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.
Historical:
Highest: 1.0842 CAD on Nov 01, 2009.
Average: 1.0147 CAD over this period.
Lowest: 0.9407 CAD on Jan 26, 2011
Economic events for the month of June affecting CAD and USD
|
Time |
Cur. |
Event |
Forecast |
Previous |
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|
Friday, June 01 |
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|
12:30 |
USD |
150K |
115K |
|||||
|
12:30 |
USD |
8.1% |
8.1% |
|||||
|
14:00 |
USD |
53.9 |
54.8 |
|||||
|
Tuesday, June 05 |
||||||||
|
13:00 |
CAD |
1.00% |
1.00% |
|||||
|
Thursday, June 07 |
||||||||
|
14:00 |
CAD |
52.7 |
||||||
|
Friday, June 08 |
||||||||
|
12:30 |
CAD |
0.3B |
||||||
|
Thursday, June 21 |
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|
12:30 |
CAD |
0.1% |
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Click here to read USD/CAD Technical Analysis.
Originally posted here
