USD/CAD Fundamental Analysis – December 1, 2015 – Forecast

Analysis and Recommendations:

The USD/CAD added 8 points as the greenback mounted a strong defense against the commodity currency. The CAD was weakened by falling gold prices and a decline in oil. The pair is trading at 1.3387 moving towards the 1.34 level. n 2015, CAD’s 13% fall versus the USD and 8.9% real trade weighted depreciation to-date this year represented a straightforward adjustment to a terms of-trade shock from lower energy prices, with the move reinforced by an active monetary response which saw policy rates slashed 50bp this year. 

The 2016 outlook for CAD is much less straightforward, as energy prices are expected to recover gradually by $15 throughout the year, yet yield differentials will continue to widen in favor of USDCAD as the Fed normalization cycle becomes more fully priced. Thus, forecasting CAD requires a judgement call as to relative sensitivities to higher oil on one hand, and wider spreads under the USD on the other hand.

This week’s focus will be the Bank of Canada meeting and Friday’s jobs data, which will be over shadowed by the ECB stimulus program and the US nonfarm payroll report.  USD/CAD is expected to peak around 1.38 as the Fed hike cycle becomes more fully priced and as energy prices might have one final bout of weakness in the early part of the year. While oil prices may steadily rise as the year progresses, the positive impact to CAD will be much muted, and only expect a retracement back towards 1.34 in the second half of 2016.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Tuesday, December 1, 2015

Government Bond Auctions

Date Time Country

Dec 02 11:30 UK Gbp 3.75bn 1.5% Jan 2021 Gilt

Dec 02 16:30 Sweden Announces details of Bond on 11 Dec

Dec 03 10:30 Spain 1.15% Jul 2020 Bono

Dec 03 10:50 France

Dec 03 11:03 Sweden Sek 0.7bn 1%

Dec 07 13:00 Norway Details bond auction on 09 Dec

Dec 07 17:30 Italy Announces details of BTP/CCTeu on 11 Dec

Dec 08 11:30 UK 3.5% 2045 Gilt auction

Dec 08 19:00 US Holds 3-year note auction

Dec 09 11:03 Sweden Holds bond auction

Dec 09 11:05 Norway Holds bond auction

Dec 09 11:30 Germany Eur 3bn Dec 2017 Schatz

Dec 09 19:00 US Holds 10-year note auction

Dec 10 19:00 US Holds 30-year bond auction

Dec 11 11:10 Italy Auctions BTPs/CCTeus