CAD Slides Below 1.41 Against USD – Scotiabank Analysis
The Canadian Dollar (CAD) continues to weaken this morning, underperforming with a 0.2% drop versus the US Dollar (USD), according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Federal Budget Impact
The federal budget outlines major spending initiatives in housing, defence, infrastructure, and productivity to stimulate investment and growth. However, the deficit outlook is concerning, with the fiscal year deficit expected to reach CAD 78 billion, significantly higher than the CAD 42 billion forecasted by the previous government in December.
"The minority government will need support to pass the budget legislation, but another election seems unlikely at this point."
Currency Movements and Risks
The CAD shows little reaction to these developments, while the USD has moved beyond the 1.4080 resistance level, now acting as initial support. This resistance breach signals further USD strength, potentially pushing the level to around 1.4160—a key retracement target marking 50% of the USD's decline from February to June.
"Spot dollar gains through the 1.4080 resistance point have been flagged as a risk for a while now, and the USD’s progress through the 1.41 handle this morning points to further appreciation."
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Summary: The Canadian Dollar continues to lag amid a rising fiscal deficit and cautious budget outlook, while the US Dollar breaks key resistance levels, hinting at further gains in the near term.