MUFG Research discusses CAD outlook in light of yesterday's BoC policy decision, and sees a scope for further weakness towards testing last year's highs in USD/CAD.
"In these circumstances, it is becoming more difficult to see the BoC raising rates this year. An easing of global trade tensions may not prove sufficient on its own to prompt the pick-up in growth the BoC is looking for later this year. The risk of a more persistent slowdown would increase if the lagged impact of tighter BoC policy continues to exert more of a dampening impact on the interest rate sensitive sectors of the Canadian economy such as consumer spending and the housing market," MUFG notes.
"At the current juncture, we judge that the balance of risks is skewed to the downside for the Canadian dollar. USD/CAD could attempt to retest last year’s highs," MUFG adds.