Canadian Dollar Fundamental Forecast: Bearish
- Canadian Dollar fell despite hawkish BoC, undermined by trade war fears
- US potentially imposing auto import tariffs could result in more CAD[1] losses
- Local economic data still tending to underperform, CPI miss could be next
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As anticipated last week, the Canadian Dollar headed lower against its US counterpart by the end of Thursday’s trading session. However, its weakness was not because of a ‘dovish hike’ from the Bank of Canada. In fact, the central bank appeared to be all but dovish. Not only did it raise interest rates, but it also alluded to more hikes down the road[3] amidst the current vulnerable global trading environment.
As a result, the Canadian Dollar rose, but gains were short lived. Instead of basking in the prospects of higher rates, CAD was left vulnerable. Falling oil prices, stocks tumbling across the world and a stronger US Dollar[4] signaled market concern about global growth slowing as President Donald Trump threatened to impose additional $200b in Chinese import tariffs[5]. Since then though, those frets have cooled somewhat.
This presents a curious scenario for the Canadian Dollar going forward, and one that may not bode well. Next week, the US Commerce Department will lead two days of hearing about whether or not auto imports pose a national security threat. BoC’s Governor Stephen Poloz has said that those auto tariffs
