The FX strategy team at Credit Agricole have released a note that focuses on the pound and Canadian dollar. Selected comments are as follows:
"The GBP remains fully driven by polls. According to the latest YouGov poll, the “Remain” camp is regarded to be ahead by one point. As such the GBP reversed most of yesterday’s losses again. Looking ahead, the GBP may become even more subject to rising volatility the closer the 23 June EU referendum comes.
However, in order to make a case of the currency breaking this year’s trading range more may be needed. This is especially true as speculative short positioning reached another multi-year extreme. We remain of the view that the currency faces upside risk given our base case remains for the UK to stay part of the EU. The longer-term outlook, however, may stay clouded.
In Canada, the focus of the week is on Friday’s labor market data. Despite the gloomier economic growth trajectory, the USD/CAD rally has struggled on weaker Fed policy divergence prospects and resilient oil prices. Canada’s uneven growth path and lingering uncertainty were highlighted over the weekend by Governor Poloz, who noted the export recovery in particular has been “halting at best.” Moreover, he was wary over the rebound in growth from the expected Q2 contraction.
When it comes to the outlook there remain negatives in the price, and as such incoming data should stay a driver to the currency. The economy-wide Ivey PMI is a volatile figure but markets will be attentive to a dip below the 50 threshold which cannot be excluded. Elsewhere, oil prices will remain a key currency driver. In order to make a case of further recovering prices improving global growth expectations or a weaker USD may be needed. We do not expect this to happen. Accordingly, we believe USD/CAD faces limited downside risks from the current levels."
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