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5 May 2015
USD/CAD year-end target at 1.27 – BAML
FXStreet (Barcelona) - Strategists at BofA-Merrill Lynch, lower their year-end forecast for USD/CAD from 1.30 to 1.27 sighting a the near-term change in drives which drove the pair higher.
Key Quotes
“CAD has turned around, after nearing 1.30 at one point. The broader USD move higher as well as the collapse in oil prices, especially at the Thanksgiving OPEC meeting, helped to push CAD lower. But the Bank of Canada's (BoC) stunning January rate cut sharply accelerated the pace of negative currency sentiment, pushing CAD lower.”
“However, oil prices have stabilized, implying that the long-term deterioration of fair value for CAD has reversed somewhat. Our commodities team recently pushed their near-term oil price forecasts higher.”
“Of further importance in the near term, however, is that the likelihood of another rate cut has significantly fallen.”
“We lower our USD-CAD forecasts to 1.27 by year-end 2015 (from 1.30) and 1.21 for year-end 2016 (from 1.23) reflecting these changes. However, the Bank of Canada's optimistic presumption for a seamless transition from energy to non-energy sector-led growth, alongside an unwind of overly dovish market Fed expectations will, in our view, help support the USD as US data gathers pace.”
Key Quotes
“CAD has turned around, after nearing 1.30 at one point. The broader USD move higher as well as the collapse in oil prices, especially at the Thanksgiving OPEC meeting, helped to push CAD lower. But the Bank of Canada's (BoC) stunning January rate cut sharply accelerated the pace of negative currency sentiment, pushing CAD lower.”
“However, oil prices have stabilized, implying that the long-term deterioration of fair value for CAD has reversed somewhat. Our commodities team recently pushed their near-term oil price forecasts higher.”
“Of further importance in the near term, however, is that the likelihood of another rate cut has significantly fallen.”
“We lower our USD-CAD forecasts to 1.27 by year-end 2015 (from 1.30) and 1.21 for year-end 2016 (from 1.23) reflecting these changes. However, the Bank of Canada's optimistic presumption for a seamless transition from energy to non-energy sector-led growth, alongside an unwind of overly dovish market Fed expectations will, in our view, help support the USD as US data gathers pace.”