I spoke with Reuters today about the Canadian dollar.
It’s surprisingly stronger given that Trump trades are working.
“We could just be seeing some position squaring. The Canadian dollar has been a heavily shorted currency,” said Adam Button, chief currency analyst at ForexLive.
“The Canadian dollar is one of the clear election night trades along with the Mexican peso in the foreign exchange market,” Button said. “Both are highly leveraged to U.S. trade and global growth.”
That about captures it but it runs against the main narrative in markets today as Trump trades are working.
Looking at Canada’s fundamentals, there isn’t much working for the loonie. The Bank of Canada is likely to cut rates at least as fast as the Fed, and likely faster, as our economic headwinds mount.
If you look at the long history of Canada, it was a major manufacturing export nation to the United States through the 20th century, along with resource extraction. The country pivoted away from that around 2000 as globalization expanded and then moved into housing and population growth as key drivers. But now population growth is reversing, housing is looking uglier by the day, and I don’t see a clear driver of economic growth.
I’m looking at 1.44 as a target over the next year or so. I spoke to BNNBloomberg about the outlook yesterday and I highlighted the size of the FX move I expect in the loonie here.