CAD: Potential restructuring of NAFTA will likely weigh - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the impact of US politics on its northern neighbour’s economy cannot be overstated as renewed discussions over the potential restructuring of NAFTA to incorporate currency levels will likely weigh on CAD, even though it has recently stabilised as oil has rebounded and USD has been sold off more broadly.

Key Quotes

“The continuation of downside risks from US is likely to weigh on Canada’s poorly performing nonresource sector. This should enforce a more dovish tone of the Bank of Canada when they meet on 24th May.”

“Given the light data calendar into month end, OPEC’s summit in Vienna on 25th may will also be critical. Although other factors may be important in the near term, CAD has a close reliance on oil prices, as shown in the chart of BoE’s CAD TWI and WTI crude shows.”

“USD/CAD has retreated from the push towards 1.3850 but is likely to remain within the upper end of its recent range.”