Canadian Dollar: Trend depends on Dollar – Commerzbank

Commerzbank’s Michael Pfister argues that recent Canadian labour data and the Bank of Canada’s latest decision suggest domestic monetary policy is unlikely to reverse the downtrend in USD/CAD. Markets have largely priced out further rate hikes, and he expects any sustained move to lower USD/CAD levels in coming weeks to hinge mainly on continued US Dollar weakness.

BoC stance and cross rate drivers

"The latest labour market figures have made it clear that a reversal of the trend towards lower USD/CAD levels is unlikely to originate from Canada."

"Whilst interest rates were expected to remain unchanged, policymakers gave no indication of any imminent rate rises."

"We continue to assume that an interest rate hike will only occur if there is a sustained improvement in real economic data by December."

"The significant decline in USD/CAD in recent days was due to the weaker US dollar."

"Those betting on lower levels in the coming weeks should therefore continue to hope for this to continue."