The Canadian greenback is in a tricky spot.
The US greenback rose 15 pips in opposition to the loonie right this moment to 1.3950, which is the primary time at that stage since 2022.
The subsequent stage to observe is 1.3978, as an increase above that stage could be the very best because the pandemic. And aside from a short spike within the pandemic, and a spike within the 2016 oil collapse, USD/CAD hasn’t been sustained at these ranges since 2003.
The issue for the loonie is that Canada’s financial system is struggling and the long-term image is worsening. The housing market is impaired and new residence gross sales are slowing as a consequence of excessive rates of interest. Even when the Financial institution of Canada cuts, longer-term mounted charges (5 years are normal in Canada) have been rising. With that, we’re in all probability already on the backside for normal Canadian mortgages and there’s no signal of rising demand.
One other driver for Canada has been inhabitants development, as this chart highlights.
That is about to enter reverse as Canada’s governing Liberals have pledged a declining inhabitants in 2025 and 2026. Now some individuals are definitely skeptical about that however in each situation, the tempo of entries into the nation materially declines and rising anti-immigration sentiment probably retains it that means by the last decade.
Some hope for the loonie comes from China stimulus and pure sources costs however these dangers run each methods.
Within the shorter-term, the chance commerce dictates what occurs subsequent with the loonie. Proper now the market is clearly on edge in regards to the US election. Not many trades round it are clear however Harris is definitely higher for Canada that Trump. She lived for a few years in Montreal and would not be trying to renegotiate NAFTA or impose tariffs.
That stated, there are definitely situations with a divided Congress and broad fairness market promoting that harm the market temper and result in loonie weak point.
There’s a good argument to be affected person in any election situation and watch for the technicals to unfold as a break of 1.4000 would goal 1.4500.
USD/CAD weekly
I talked about these themes intimately with BNNBloomberg earlier within the week.
