Goldman Sachs says long CAD not preferred to capture US dollar weakness

Key Points

1. BoC Rate Hike: The Bank of Canada (BoC) has implemented another 25bp rate hike, which was in line with market expectations.

2. Potential for Further Hikes: There’s an increased likelihood of another rate hike later in the year, possibly as soon as September. This speculation arises from the BoC’s resolute commitment to revert inflation back to the 2% target. The threshold for a pause in rate hikes appears higher now, signaling potential continuity in this tightening trajectory.

3. Currency Implications: However, another rate hike might not have the same positive effect on the currency in the short term as before. With the Dollar experiencing a weakening phase due to moderating inflation concerns, CAD might face challenges in other currency pairs.

4. CAD vs. USD Dynamics: While a declining Dollar should typically push USD/CAD lower, the Canadian dollar is not Goldman’s first choice for capitalizing on USD’s weakness. This is primarily due to CAD’s high sensitivity (or beta) to USD movements.

is via the folks at eFX.

bank trade ideas, check
out eFX Plus
For a limited time, get a 7 day free trial, basic for $79 per month
and premium at $109 per month. Get
it here

This article was written by Eamonn Sheridan at Source