Street Calls of the Week
Investing.com - The Canadian dollar has emerged as the clear underperformer among major currencies this week following disappointing employment data from Canada, according to analysis from UBS.
The Bank of Canada (BoC) is now expected to implement an interest rate cut at its meeting next week, with market pricing reflecting high probability of monetary easing. This follows the release of softer-than-anticipated Canadian labor market statistics.
Despite the anticipated BoC rate cut, UBS notes that the overall scope for policy easing in Canada remains significantly more limited compared to the Federal Reserve’s expected path. This disparity in monetary policy trajectories continues to be the primary factor influencing the USD/CAD exchange rate.
The U.S. central bank’s policy decisions carry greater weight for the currency pair because the American growth outlook and Federal Reserve policy direction are likely to be the main drivers of local real money hedging flows, UBS explains.
The analysis suggests that while Canadian monetary policy is shifting toward easing, the Federal Reserve’s decisions will remain the dominant influence on the USD/CAD exchange rate in the near term, regardless of the BoC’s actions next week.
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