HomeForex MarketCanadian Greenback Could Lose Floor Even because the BOC Delivers

Canadian Greenback Could Lose Floor Even because the BOC Delivers

CANADIAN DOLLAR WEEKLY OUTLOOK: BEARISH

  • Canadian Greenback well-supported in 2022 relative to different commodity currencies
  • Oil worth rise could not clarify outperformance as petro-minded NOK lags behind
  • Charges outlook more likely to be key, in-line BOC could go away room for deeper pullback

The Canadian Greenback has fared significantly higher than different commodity-linked currencies thus far this 12 months, regardless of a bitter market temper. The so-called Loonie is monitoring second solely to its US counterpart among the many G10 FX currencies, pulling forward of the equally sentiment-geared Australian and New Zealand {Dollars}.

Elevated crude oil costs is perhaps a tempting clarification for this outperformance. Russia’s invasion of Ukraine disrupted crucial provide routes and despatched power prices greater, driving windfall capital into the fingers of high exporters, together with in Canada. The equally oil-linked Norwegian Krone lagged vastly behind, nevertheless.

CAD up towards AUD, NZD and NOK year-to-date (weekly chart)

Chart crated with TradingView

CAD resilience would nonetheless be examined amid an upswell of worries about on-coming recession in latest weeks. Economists marked down world GDP forecasts for 2023, a number of massive corporations like Goal and Walmart issued spooky steerage, and merchants marked down central bankers’ urge for food for fee hikes.

The speed hike path priced out for the Financial institution of Canada (BOC) was no completely different, edging decrease in tandem with the native unit. The forex has shed 1.3 p.c towards a median of its main counterparts over the previous two weeks. How this a part of the story develops appears central to how worth motion will evolve from right here.

CAD down for 2 weeks towards high forex counterparts (weekly chart)

Canadian Dollar May Lose Ground Even as the BOC Delivers

Chart crated with TradingView

CANADIAN DOLLAR MAY LOSE GROUND AS BOC DELIVERS ON EXPECTATIONS

GDP information is first within the highlight. It’s anticipated to point out that output grew at an annualized tempo of 5.2 p.c within the first three months of the 12 months, down from 6.7 p.c within the fourth quarter. A coverage announcement from the BOC is more likely to be the primary occasion nevertheless, and any substantive strikes will most likely look forward to it.

The central financial institution is predicted to ship no less than a 50 foundation level (bps) fee hike. What’s extra, the markets worth in an almost even likelihood of a bigger 75bps rise. With such heady outcomes already factored in, engineering a hawkish shock is perhaps considerably troublesome.

With that in thoughts, even delivering at baseline could register as one thing of a disappointment towards the backdrop of broad-based progress considerations. Absent a recent injection of unmistakably hawkish rhetoric, the priced-in fee hike path could soften a bit extra on the longer finish, pressuring the Canadian Greenback downward.

CANADIAN DOLLAR TRADING RESOURCES

— Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the feedback part beneath or @IlyaSpivak on Twitter

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