CAD Softer Amid Weak Risk Appetite – Scotiabank
The Canadian Dollar (CAD) is easing this morning due to weak risk appetite, though its decline is more moderate compared to other high-beta and commodity currencies, according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
BoC Remarks and Fiscal Outlook
BoC Governor Macklem’s comments yesterday reaffirmed the message following last week’s policy decision. The monetary policy remains somewhat stimulative, but the Bank of Canada faces limits in countering the economic headwinds caused by trade disruption.
Finance Minister Champagne is set to present a Federal budget just after 4 pm, described as a 'no surprises' budget, with core fiscal plan elements already disclosed.
- Increased spending on defense, housing, and infrastructure projects.
- Spending cuts applied to address economic challenges stemming from US trade policies.
Trade and Legal Developments
The US Supreme Court will hear arguments regarding the legality of President Trump’s use of emergency powers to impose tariffs on Wednesday. A ruling is not expected before February next year.
Canadian trade data release has been delayed due to the US government shutdown, as both countries rely on shared import data to compile trade balances.
Market Technicals
Spot USD/CAD gains are approaching the mid-October high of 1.4080, which is the key resistance before possible moves to the mid-1.41 level and a retracement resistance around 1.4160.
Intraday support for USD stands at 1.4040-1.4050, and losses need to break below 1.40 for USD/CAD to extend downward further.
"Monetary policy is somewhat ‘stimulative’ but there were limits on what the BoC can do to offset the headwinds from trade turmoil."
"Finance Minister Champagne will table a ‘no surprises’ Federal budget just after 4pm. Core elements of the government’s fiscal plans are already known."
"The US Supreme Court will hear arguments on the legality of President Trump’s use of emergency powers to impose tariffs Wednesday. A decision is unlikely before early next year (February) at this point."
Summary: The Canadian Dollar faces moderate pressure amid cautious risk sentiment, with BoC policy limits, delayed trade data, and pending US legal decisions shaping near-term dynamics.