CAD Weakens Beyond 1.41 Against USD
The Canadian Dollar (CAD) continues to weaken this morning, underperforming with a 0.2% loss against the US Dollar (USD), according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Federal Budget Impact
The recent federal budget details substantial spending on housing, defence, infrastructure, and initiatives to enhance productivity and competitiveness, aiming to stimulate investment and growth.
"The red ink spillage is significant, though with the current FY deficit forecast to rise to CAD78bn (well above the CAD42bn projected under the previous government back in December)."
Political Outlook
The minority government will require support for budget approval, but another election is considered unlikely at this stage.
"The CAD looks unimpressed and spot gains are deviating more significantly (well above one standard deviation) from our fair value estimate (1.3917) again."
Technical Levels and Forex Trends
Spot dollar gains have surpassed the 1.4080 resistance, now acting as support. The USD breaking through the 1.41 level signals potential further appreciation towards the 1.4160 area, which corresponds to a 50% retracement of the February to June USD decline at 1.4167.
The FXStreet Insights Team curates expert market observations, combining notes from commercial and external analysts.
Author’s Summary
Canadian Dollar weakness continues due to a rising fiscal deficit and cautious political outlook, pushing USD/CAD towards key technical resistance levels indicating further USD strength.