USD/CAD could trade more sustainably above 1.30 into mid-year - Westpac

CAD probably withstands higher yields and a stronger USD better than its dollar bloc peers AUD and NZD, thanks to robust oil prices and BoC hike expectations, but it won’t be completely immune, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“USD/CAD could trade more sustainably above 1.30 into mid-year or at least until such time the BoC feels compelled to adjust their stance and signal imminent hikes (probably no later than mid Q3).”

“Market pricing for BoC hikes has settled at +45bp to year’s end in the wake of last week’s BoC meeting. Yet two +25bp hikes this year are still more likely than not thanks to the still solid underlying growth picture (higher terms of trade, healthier consumer spending/ confidence, fiscal easing). H2 2018 likely more fertile ground for CAD gains.”