By eFXdata — May 17 - 03:00 PM
Morgan Stanley continues to recommend long USD/CAD positions. The market pricing of Fed policy compared to other G10 central banks suggests that investors expect the risk of a US hard landing and financial stability concerns to remain US-specific issues.
However, Morgan Stanley believes that investors are underestimating the potential magnitude of growth spillovers to the rest of the world if US economic growth decelerates quickly. In such a scenario, Morgan Stanley sees safe-haven flows strengthening the US dollar.
Meanwhile, growing risk aversion and a subdued outlook for oil prices will likely weigh on the Canadian dollar (CAD). Therefore, the financial institution maintains a bullish stance on USD/CAD.
Source:
Morgan Stanley Research/Market Commentary