The Canadian dollar suffers from the slide in oil prices, which has suffered further falls following the inventories release. There could be more falls in store, says the team at CIBC:
Here is their view, courtesy of eFXnews:
The Canadian dollar has come a long way from the strength observed in May of this year. That selloff occurred after the Bank of Canada cited risks to exports from the loonie’s appreciation. Indeed, a recent dip in exports likely fed into the CAD correction, with weaker oil prices weighing on the currency more recently.
The damage to the loonie has been cushioned by bond flows seeking countries that still have positive yields as well as a buildup of speculative long CAD positions in recent weeks. Those positions, which had been pared back on weaker Q2 data, appear to have rebounded in the wake of the Brexit vote. Although oil could find some stability over the remainder of the year, there’s one last move in store for the loonie come December. That’s when Janet Yellen and the rest of the FOMC will vote in favour of raising interest rates again, something not yet priced in by the market.
With oil prices not seeing much action for the remainder of the year, the move by the US central bank will send the loonie back to the 1.35 level versus the greenback by the end of the year.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.