Extra weak point forward for Canadian greenback – Jefferies

Investing.com – The Canadian greenback has suffered towards the US greenback within the wake of the US presidential election, and Jefferies sees this weak point as more likely to proceed for a while.

At 09:00 ET (14:00 GMT), USD/CAD traded 0.2% decrease at 1.3992, however the pair is round 1.4% larger over the course of the final month, with the Canadian greenback falling to a four-year low towards its US counterpart within the wake of the US election.

“The market has spoken following the end result of the US election and a weak Canadian greenback is probably going right here to remain,” stated analysts at Jefferies, in a observe dated Nov. 19.

Though particulars of proposed insurance policies are nonetheless to be ironed out, the preliminary read-through implies a less-than-helpful macro backdrop for the Canadian economic system–the US is Canada’s largest buying and selling companion–following the victory of Donald Trump firstly of the month.

”Tariffs on imports, decrease taxes, and proposed monetary regulatory adjustments all spell relative headwinds, the influence of which is compounded by an already weak Canadian economic system (GDP progress persistently under expectations, weak labour market, and many others.),” analysts at Jefferies added. 

Together with inflation now inside the Financial institution of Canada’s goal vary, the US financial institution expects to see additional central financial institution fee cuts.

The mix of sturdy fee cuts by the Financial institution of Canada and the expectations {that a} Trump presidency could be optimistic for the U.S. economic system (and doubtlessly generate inflation, decreasing the probability of sturdy fee cuts) has weakened the Canadian greenback. 

“Additional, it doesn’t seem like the state of affairs will reverse itself any time quickly. Consequently, we don’t see the CAD gaining floor on the USD, and because the Financial institution of Canada continues to chop charges, we might see further weak point within the CAD,” Jefferies added.