USD/CAD Drops as Canada’s Budget Deficit Expected to Shrink

Forex market sentiment wasn’t favorable for riskier assets today, but Canada’s dollar managed to gain against the US dollar and the euro. The currency also reduced its losses versus the Japanese yen.

Traders’ optimism very quickly turned to uncertainty as signs all around the world spoke about economic slowdown. Concerns about Europe resurfaced, while economists became less optimistic about the United States and China.

The Canadian currency was negatively affected by the unfavorable market sentiment, but managed to rebound. One of the reasons of the rebound may be the forecast that Canada’s budget deficit will shrink by the end of the year. As Camilla Sutton, the head of currency strategy at Bank of Nova Scotia, put it:

There’s not likely to be a significant knee-jerk reaction to the budget. In the more medium term, it’s likely to be positive. Canada is likely to reach a balanced budget much sooner than its peers. The budget will highlight the stronger aspects of Canada.

Some analysts advised to sells the greenback against the loonie.

USD/CAD was down from 0.9985 to 0.9967 as of 22:43 GMT today, while earlier it climbed as high as 1.0017. EUR/CAD slid from 1.3296 to 1.3255, erasing yesterday’s gains. CAD/JPY traded at 82.67, following the drop from 82.93 to 81.79 — the lowest rate since March 8.

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