CAD Softer Amid Weak Risk Appetite – Scotiabank
The Canadian Dollar (CAD) experienced mild declines this morning due to weak risk appetite, although its losses were more moderate compared to other high beta and commodity currencies. This was highlighted by Scotiabank's Chief FX Strategists, Shaun Osborne and Eric Theoret.
Monetary Policy and Fiscal Outlook
Bank of Canada Governor Macklem’s comments yesterday reinforced the stance given after last week’s policy decision. The monetary policy remains somewhat stimulative, but the Bank of Canada faces limits in offsetting economic challenges caused by trade disruptions.
"BoC Governor Macklem’s remarks yesterday afternoon stayed on the messaging delivered after last week’s policy decision. Monetary policy is somewhat 'stimulative' but there were limits on what the BoC can do to offset the headwinds from trade turmoil."
Finance Minister Champagne is expected to present a Federal budget shortly after 4pm, described as a ‘no surprises’ plan with most core elements already anticipated.
"There will be more spending on defence, housing and infrastructure projects on the one hand and spending cuts on the other in response to the economic challenges thrown up by US trade policy."
Trade and Legal Developments
The US Supreme Court will hear arguments regarding the legality of President Trump’s emergency powers used to impose tariffs, with a decision unlikely before February next year. Meanwhile, Canadian trade data remain delayed due to the US government shutdown, as both countries depend on reciprocal import data to calculate trade balances.
USD/CAD Technical Levels
Spot USD/CAD is approaching the mid-October high near 1.4080, a key resistance level ahead of potential gains to the mid-1.41 range and further retracement resistance at 1.4160. Intraday support for USD stands between 1.4040 and 1.4050. For USD/CAD losses to deepen, prices need to fall below 1.
Author's summary: The CAD faces moderate pressure amid low risk appetite and trade-related challenges, with market focus on upcoming budget details and US tariff legal rulings.