Canadian Dollar: Underperformance persists on wider spreads – Scotiabank
Scotiabank strategists Shaun Osborne and Eric Theoret highlight that USD/CAD remains elevated near 1.40 after the FOMC, with the Canadian Dollar (CAD) underperforming peers as the Fed/BoC rate differential returns to 175bps.
Scotiabank strategists Shaun Osborne and Eric Theoret have noted that the Canadian Dollar (CAD) continues to underperform against major peers despite elevated spreads following the FOMC. The CAD has struggled to recover, unlike most of its peers, maintaining its position as a clear underperformer. The widening front-end spreads, with the Fed/BoC policy rate differential at 175bps, are primarily responsible for the CAD's weakness.
The fair value model suggests an equilibrium exchange rate of 1.3894, indicating a degree of USD overvaluation but with limited prospects for narrowing the gap. Technical analysis points to potential USD gains above 1.40, with the 50% retracement resistance at 1.3990 currently holding. However, trend momentum has shifted, and a sustained push through 1.40 could support further gains towards 1.4050/1.4125.
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