CAD Softer Amid Weak Risk Appetite
The Canadian Dollar (CAD) is experiencing modest losses this morning due to weak risk appetite, though its decline is less severe compared to other high beta and commodity currencies. This assessment comes from Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Monetary Policy and Government Fiscal Plans
Bank of Canada Governor Macklem’s recent remarks reinforced the stance from the previous week’s policy announcement. Although monetary policy remains somewhat stimulative, the central bank faces limits in countering the challenges posed by trade tensions.
"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 set to present a Federal budget shortly after 4pm, described as a “no surprises” plan since core fiscal elements have already been disclosed.
"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 Policy and Legal Developments
The US Supreme Court is scheduled to hear arguments regarding the legality of President Trump's use of emergency powers to impose tariffs this Wednesday. A ruling is not expected before early next year, possibly February.
Canadian trade data releases are currently delayed due to the US government shutdown, as both countries depend on reciprocal import information for calculating trade balances.
Currency Market Technical Levels
- Spot USDCAD is approaching the mid-October high near 1.4080, which represents key resistance.
- Further USD gains could target the mid-1.41 range and additional resistance near 1.4160.
- Intraday support levels lie between 1.4040 and 1.4050.
- For USDCAD losses to intensify, prices need to drop below 1.40.
Author's summary: CAD is modestly weaker due to risk aversion and trade uncertainties, with limited BoC options and ongoing fiscal adjustments in response to US trade policy challenges.