CAD should be among the outperformers in 2018 – Westpac

USD/CAD bounce amidst the sharp fall in equities and energy prices leaves CAD unchanged for the year and the weakest G10 currency versus the USD YTD, points out Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“Yet the economy has weathered +75bp in BoC hikes in six months without too much fuss and financial conditions have not tightened unduly either, a perennial concern for BoC officials (see over). Against that backdrop OIS pricing for another +50bp in hikes by Q4 is reasonable and if anything could be on the light side.”

“With global growth firming and the BoC to deliver at least as many hikes as market pricing, CAD should be among the outperformers in 2018. NAFTA remains a risk but still leaning toward 1.20 before 1.30 on a 6mth horizon if the aforementioned scenario plays out.”