ING FX Strategy Research notes that June has been a game-changing month for our CAD outlook.
“Risks of a perfect storm brewing over the summer period have reduced with concerns over financial stability and NAFTA renegotiations easing.
Add to this a less dovish BoC and one may argue that we’ve seen a trifecta of ‘good’ news for the CAD. Both Governor Poloz and his Deputy (Wilkins) have hinted that policy rates may have bottomed; this hawkish reassessment has triggered a clear out in short CAD positions – which we note were at a 5-year high at the end of May,” ING adds.
What’s next for CAD?
ING argues that although the near-term outlook for the loonie has turned positive, they are wary of hastily calling for any cyclical turning point.
As such, ING sees USD/CAD returning to 1.36 in 3-month on the back of soft oil prices and weaker macro data.
Source: ING Global Markets Research
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