CAD After Carney
Tomorrow (May 29th) Mark Carney will preside over his final Bank of Canada policy decision. His legacy in Ottawa and beyond is not in question – especially given where he is heading – but investors with positioning in CAD will be mindful that the economy he leaves behind is not exactly in rude health. For the first time in several years, opportunities south of the border look more appealing. The current consensus is that incoming Governor Poloz’ will retain a ‘weak [Canadian] dollar’ policy given his stated preference for exports to fuel the recovery. In anticipation, 1-year risk reversals in USDCAD are already the most bid for dollar calls in over three quarters. We expect such expectations to drive the CAD weaker for the coming months. Nevertheless, we doubt taming the CAD will be at the top of the agenda for Poloz as he assesses the structural fault lines in the economy.
Click here to read the full report: UBS