MNI BRIEF: Fed Review Must Incorporate Many Scenarios - Kugler

MNI BRIEF: Fed's Kugler Says Makes Sense To Hold For Some Time

MNI BRIEF: Job On Inflation Not Done, Care Needed - BOE Pill

MNI BRIEF: Mexico Inflation Down To 3.59% In January

MNI BRIEF: Tariffs Force CBRT To Hike 2025 Inflation Forecast

MNI China Daily Summary: Friday, February 7

MNI: US DEC CONSUMER CREDIT +$40.8B

MNI: BAKER HUGHES US RIG COUNT 586; OIL RIGS 480; GAS RIGS 100

BAKER HUGHES CANADA RIG COUNT 249; OIL RIGS 177; GAS RIGS 72

GERMANY: Economy Ministry Lowers 2025 Growth Forecast As Expected

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

GERMANY: Kukies Considers Potential Non-Implementation Of 2024 Suppl' Budget

© 1982-2025 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

CANADA: CIBC On USDCAD In Tariff Scenarios

CANADA
CanadaBulletMarketsForeign Exchange BulletsNorth America
  • Working off a BoC study from Jul 2019, which shows a 25% sweeping tariff could be worth around 6% of Canadian real GDP, CIBC estimate that the BoC’s overnight rate could fall as low as 0.8% with 2Y yields at 1.65% and USDCAD at 1.5340.
  • This is a hypothetical scenario. “Implementation hurdles, negotiation, and the high risk of retaliation in this scenario makes it little feasible that a trade war will get that far”.
  • They estimate that USDCAD currently has 2.3% of Trump premium.
  • Considering alternate scenarios, complete elimination of tariff risk would see USDCAD “move strictly off our Bank and our Fed call (CIBC Economics BoC: 4x 25bps cuts every meeting until June; Fed: H1 hold, 3x 25bps cuts in H2). In this case, USD/CAD hovers between 1.43-1.44 in H1 on continued headline uncertainty, before falling to 1.3750 in the back half of the year due to more aggressive Fed cuts in H2.”
  • Alternatively, they run scenarios with 10% tariffs and 20% tariffs with both energy & auto carve-outs as well as just energy carve-outs. Against these scenarios, they see USDCAD peaking at 1.461 and 1.468 in the 10% case or 1.478 and 1.496 in the 20% case.
  • “The market implied probability of spot moving above 1.4610 by Q2 is just over 20%; above 1.4960 is just over 10%. This implies that while high-stake tariffs are not expected to be the base case, the market has assigned a larger-than-zero chance that they can happen.”
243 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • Working off a BoC study from Jul 2019, which shows a 25% sweeping tariff could be worth around 6% of Canadian real GDP, CIBC estimate that the BoC’s overnight rate could fall as low as 0.8% with 2Y yields at 1.65% and USDCAD at 1.5340.
  • This is a hypothetical scenario. “Implementation hurdles, negotiation, and the high risk of retaliation in this scenario makes it little feasible that a trade war will get that far”.
  • They estimate that USDCAD currently has 2.3% of Trump premium.
  • Considering alternate scenarios, complete elimination of tariff risk would see USDCAD “move strictly off our Bank and our Fed call (CIBC Economics BoC: 4x 25bps cuts every meeting until June; Fed: H1 hold, 3x 25bps cuts in H2). In this case, USD/CAD hovers between 1.43-1.44 in H1 on continued headline uncertainty, before falling to 1.3750 in the back half of the year due to more aggressive Fed cuts in H2.”
  • Alternatively, they run scenarios with 10% tariffs and 20% tariffs with both energy & auto carve-outs as well as just energy carve-outs. Against these scenarios, they see USDCAD peaking at 1.461 and 1.468 in the 10% case or 1.478 and 1.496 in the 20% case.
  • “The market implied probability of spot moving above 1.4610 by Q2 is just over 20%; above 1.4960 is just over 10%. This implies that while high-stake tariffs are not expected to be the base case, the market has assigned a larger-than-zero chance that they can happen.”