USD/CAD inter-markets: re-focus on 2016 lows?

A continuation of the risk appetite trends in the global markets remains supportive of further demand for the Canadian dollar, in turn helping USD/CAD to visit multi-day lows in sub-1.2600 levels earlier today.

CAD solid momentum is also backed by the positive performance of the Canadian money markets, with 5-year and 10-year yields just below session peaks. In the same direction, volatility tracked by VIX remains depressed around daily troughs, reflecting the broad-based risk-on sentiment.

CAD is also deriving support from the recovery in crude oil prices, with the barrel of West Texas Intermediate flirting once again with the psychological $50.00 mark.

In the very near term, risk trends persist as the exclusive driver behind CAD’s price action ahead of the UK Referendum results. According to latest poll results, a ‘Remain’ win seems to be the most likely outcome. In that case, and after an expected initial surge in the risk-associated space, remains the question of how much of the current upside in riskier assets (namely GBP) has been already priced in, and how likely is the possibility of a (sharp?) correction.