The Canadian dollar has been under pressure for quite some time, unable to rise with oil and struggling with the recent dovish comments of the BOC. What’s next?
Here is their view, courtesy of eFXnews:
BoC Setting The Stage For A Meaningful Dovish Shift; Upside Risk To Our USD/CAD Targets – Goldman Sachs
The Bank of Canada and Canadian Dollar have recently moved into focus. At last week’s policy meeting, which was one of four meetings per year that include a formal forecast update and Monetary Policy Report (MPR), the forecast revisions surprised us on the dovish side and Governor Poloz put markets on notice that the Bank had contemplated a rate cut. Poloz argued that uncertainty was unusually high at this meeting, which kept the BoC on hold. In particular, he flagged the rebound in exports in July and August and the potential for improved sentiment following the US elections.
We discuss our take and implications for $/CAD. The more fundamental issue is that the revised growth outlook is really quite conservative, leaving open the possibility that data will surprise positively near term. While that may be the case, our read is that Governor Poloz is setting the stage for a meaningful dovish shift in coming months, not unlike the shift in late 2013 that saw the Bank move from a tightening bias to an easing bias.
As a result, we see upside risk to our 3-month (year-end) forecast of 1.35 and 12-month forecast of 1.40.
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