MUFG Research discusses CAD outlook and maintains a structural bearish bias over the medium-term.
"Our current FX forecasts indicate our view of likely CAD underperformance over the forecast horizon. Our view is based on the risks that the consequence of this relatively aggressive action by the BoC would be weak data emerging in Canada ahead of most other G10 countries. Close links to the US reinforce that risk given the Fed action and the prospect of slower US growth as well," MUFG notes,
"There were other factors weighing on CAD yesterday. The sale by HSBC of its Canada unit to RBC was announced and fuelled speculation of outflows from Canada with HSBC reportedly using the proceeds for a one-time dividend or a share buyback program...CAD underperformance yesterday was stark. A one-off HSBC flow may have played a role in this but nonetheless the fundamental backdrop is worsening and the CAD outperformance this year relative to non-USD G10 is likely to reverse further from here," MUFG adds.