CAD: Delayed political impact? – ING

Francesco Pesole, FX strategist at ING, suggests that they’re not excluding 'delayed' political impact on the loonie if there is some uncertainty in the coming days or signs of negative spillover in the energy sector as a result of recent elections.

Key Quotes

“We expect any impact to be broadly limited in size given the market's focus on developments in UK parliament, upcoming Bank of Canada and Federal Reserve meetings and ongoing trade negotiations.”

“If optimism on a Brexit deal continues to fuel global appetite for risk assets, we don't see reasons to exclude an extension of the recent CAD outperformance. Indeed, the loonie is still the most attractive G10 activity currency thanks to its supportive rate outlook and stabilising commodity prices.”

“In addition, the long-awaited ratification of the USMCA by the US Congress seems very near after Democratic House speaker Nancy Pelosi's constructive comments and White House economic adviser Larry Kudlow suggestion the vote should occur by Thanksgiving.”

“We see it as a positive factor for CAD. In turn, we don't exclude a break below 1.30 in USD/CAD in the near future, although some tangible improvements on the US-China trade negotiations will be needed to maintain the pair below that level.”