MUFG Research discusses CAD outlook and flags a scope for further strength in the near-term.
"The Canadian dollar benefitted from the board-based US dollar sell off yesterday which resulted in USD/CAD falling back towards the 1.3200-level after hitting a recent intra-day high of 1.3383. The Canadian dollar received a boost as well from the less dovish than expected BoC policy update. The BoC failed to provide a clear signal yesterday that they planning to cut rates as soon as next month. Instead, the BoC reiterated that the “current degree of monetary policy stimulus remains appropriate”. It did not sound like a central bank that wanted to validate building market expectations for an imminent rate cut," MUFG notes.
"Nonetheless, the BoC’s less dovish than expected policy update should encourage the Canadian dollar to trade on a firmer footing in the near-term. USD/CAD had been threatening to break back above the 1.3500-level recently which now appears less likely," MUFG adds.