CAD: Relative outperformer amid USD strength - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the CAD should be a relative outperformer amid USD strength.

Key Quotes

 “Dep. Gov. Wilkins delivered a very dovish speech 6 Oct. It is possibly an easing signal though we think recently stronger data (trade, IVEY, jobs, building permits, monthly GDP) will ultimately see the arguments in favour of “patience” win out one more time. That said the BoC likely maintains their less upbeat narrative and repeats, “the risks to the inflation outlook have tilted somewhat to the downside”.

Trudeau’s fiscal stimulus kicks in more forcefully in Q4 and oil prices have meaningfully outperformed both iron ore and dairy, flagging risks of a deeper decline in AUD/CAD and NZD/CAD.

Fade strength in USD/CAD toward 1.33, though hard to see it sustainably below 1.30 at least until the Dec Fed hike is fully priced in and out of the way.”