Canadian dollar outlook: USD favoured over CAD, but 'into parity' advise analysts at Westpac

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Published on Friday, 22 June 2012 13:27

Written by Sam Coventry

"CAD has regained 0.2% of yesterday’s losses; however it is trading close to its weakest point in five sessions" - Camilla Sutton at Scotiabank.

The Canadian dollar (Currency:CAD) has advanced alongside other 'risk-on currencies' today as markets recover some of that ground lost yesterday.

The US dollar vs Canadian dollar exchange rate is 0.21 pct lower at 1.0273.

The pound vs Canadian dollar exchange rate is 0.22 pct down on the day, GBP-USD is at 1.6024. (Please visit our IMT site for the latest FX forecasts, access via this Facebook entrance link).



Analysts at Westpac have today said they are still biased towards further Canadian dollar weakness, given the prevailing economic environment:

"Open to a fall in USD/CAD towards 1.01-1.00 but much further below would imply global conditions have improved much more than is genuinely the case.

"The FOMC did not over-deliver and neither will the EC leaders summit next week. Prefer to buy USD/CAD into parity if seen."

Commenting on today's CAD performance, Camilla Sutton at Scotiabank says:

"CAD has regained 0.2% of yesterday’s losses; however it is trading close to its weakest point in five sessions. Concerns over the global growth outlook have weighed on both WTI oil, which at $78.50 is at eight month lows and CAD."

On the Canadian fundamental front, yesterday’s tightening of mortgage regulation in Canada is a positive step for the fundamental backdrop; one that diminishes the risk of a more serious housing correction later.

In addition, it takes some pressure off the BoC to increase policy rates.

Today’s release of CPI, expected to increase 0.1%m/m on headline and 0.3%m/m on core, is important for the BoC; however it is likely to be contained and therefore leaves lots of room for policy flexi- bility on the part of the BoC (see top chart)