CAD Softer Amid Weak Risk Appetite – Scotiabank
Weak risk appetite is causing the Canadian Dollar (CAD) to dip this morning, though its losses are more moderate compared to other high-beta or commodity-linked currencies, according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Monetary Policy and Fiscal Outlook
Bank of Canada Governor Macklem’s remarks reinforced last week’s policy message. The monetary stance remains somewhat stimulative, yet the Bank of Canada has limited ability to counteract headwinds from trade disruptions.
“BoC Governor Macklem’s remarks yesterday afternoon stayed on the messaging delivered after last week’s policy decision. 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 is expected to present a predictable Federal budget shortly after 4pm, with core fiscal plans largely anticipated.
“There will be more spending on defence, housing and infrastructure projects on the one hand and spending cuts on the other in response to the economic challenges thrown up by US trade policy.”
Trade and Tariffs Update
- The US Supreme Court will hear arguments on the legality of President Trump’s use of emergency powers to impose tariffs, scheduled for Wednesday.
- A decision is not expected until early next year, possibly February.
- Canadian trade data release is delayed due to the US government shutdown, affecting the reciprocal import data used for trade balance calculations.
Technical Outlook for USD/CAD
Spot gains are approaching the mid-October high of 1.4080, the key resistance for USD gains moving into the mid-1.41 range, with further retracement resistance at 1.4160. Intraday support lies at 1.4040–1.4050. For USD/CAD losses to deepen, prices need to break below 1.40.
“Spot gains are closing in on the 1.4080 high from mid-October that stands as the only obvious resistance point to USD gains extending to the mid-1.41 range and retracement resistance at 1.4160. Intraday support is 1.4040/50 for the USD. USDC/AD losses need to extend below 1.”
Author's summary: The Canadian Dollar faces moderate pressure amid cautious market sentiment, constrained monetary support, ongoing trade uncertainties, and key resistance near 1.4080 USD/CAD.