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    USD/CAD to end 2016 at 1.24 on oil recovery - Lloyds  Bank

    Analysts from Lloyds Bank, anticipate that the USD/CAD pair could end 2016 around 1.24 based on their expectation of a continuation of the recovery in crude oil prices.Key Quotes:“USD/CAD has been heavily influenced by the shifting implied probability of an interest rate rise in June from the US Federal Reserve. During May, relatively stable US data and less dovish rhetoric from FOMC members, including Fed Chair Yellen, led to the markets re-pricing the chance of a June hike. USD/CAD responded by rallying up to a high near 1.32.”“However, June’s below-par US labour market report and rise in the oil price (which breached $50/barrel for the first time since last September) prompted a reversal, with USD/CAD dropping nearly 4% in early June.”“Recent Canadian data have been mixed. Although Q1 GDP growth was below expectations (rising by 1.1% y/y), core inflation was stronger at an annualised 2.2%. Against this backdrop, the BoC left monetary policy unchanged at its most recent meeting. Governor Poloz maintained his optimistic view for the second half of the year, but explicitly mentioned that “housing vulnerabilities have moved higher”.”“On balance, given our expectation that the oil recovery continues, we anticipate moderate CAD appreciation towards 1.24 by year-end.”  

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