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Canadian dollar trend tied to USD weakness, Commerzbank says

Commerzbank expects any sustained drop in USD/CAD to depend mainly on continued US dollar weakness rather than a shift in Canada’s policy outlook.

Reported · Written up by our desk · Major Pairs

Commerzbank’s Michael Pfister said recent Canadian labor data and the Bank of Canada’s latest decision point to Canadian monetary policy being unlikely to reverse the downtrend in USD/CAD.

Pfister noted that markets have largely priced out further rate hikes, and he expects any sustained move lower in USD/CAD in coming weeks to hinge mainly on continued weakness in the US dollar.

The view comes after the Bank of Canada held its policy rate at 2.25% and published a Monetary Policy Report, with its disinflation path tied to the assumption that Brent falls to $75 and stays there.

FXStreet reported that the article also references Canada’s June CPI, including a 0.4% month-on-month decline and a drop in the annual rate to 3.5% from 4.2%, while core prices were flat on the month and down to 2.6% year on year.

Latest closeBrent $85.39 ▲0.8%

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