The Canadian dollar continues to stabilize by the end of the week trading against the Euro at 0.65. According to Wall Street bank, J.P Morgan CAD has expected struggle going into October due to the current account deficit in Canada’s terms of trade.
But with the recovery in global oil numbers, the Canadian economy has prevailed despite import rates bring higher than exports. “If WTI manages to stay above US40/bbl next week, CAD may be a key G10 outperformer,” says Francesco Pesole of ING Bank N.V.
The loonie is increasing steadily as a recovery in global stocks and commodity prices continue to the surgeon on a weekly basis.
“There remains the risk that CAD needs to adjust to balance its international trade and capital flow—or instead warrant an ongoing risk premium to compensate its external values” says Patrick Locke, a strategist at J.P Morgan.
The CAD exchange rate against GBP is 0.59 today; strategist Meera Chandan at J.P Morgan explains that “we remain bearish GBP given our view that risks to GBP from Brexit are still asymmetric to the downside given the UK’s reliance on foreign capital and the lack of sufficient the risk premium for a no-deal Brexit.”
The CAD exchange rate against GBP fell half a percent, and CAD is 0.40% lower against the Euro, while there has been a 0.20% increase in the Canadian dollar trading against USD.
“Year-end target still above spot to reflect potential upside from US Election risk premium, but tweaked from 1.20 to 1.19 for possible fallout from Brexit contagion. Medium-term forecasts extend to 1.16 in 3Q’21 to reflect skepticism around the quality of European growth” Chandan continues.
Based on the reliance to the US economy, the Canadian dollar is forecasted to perform well in the coming months due to close trade relations. 1 CAD has an exchange rate of 0.76 against USD today and is forecasted to remain steady throughout the election.
With growing employment rates, Canada’s currency is expected to increase in value by the end of the quarter. Juan Prada at Barclays in New York says “officials at the Bank of Canada and the government are providing ample support to expect some degree of outperformance in the coming weeks.”
By Surina Nath