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CPI Buffer From Higher CAD Would Be Nice - Rogers

  • In Q&A, BoC Senior Dep Gov Rogers said a CPI buffer from a higher Canadian dollar would be nice when asked in relation to no longer having the offset from an appreciating currency under improved terms of trade (ToT) – full comment here.
  • The unusual move to specifically jawbone the currency helped see USDCAD stick near session lows at 1.3110 before breaking lower to 1.3086 as WTI hit session highs. However, it is still up almost 3% from August lows, having yesterday come close to testing key resistance at the July 14 high of 1.3224, clearance of which would have opened late 2020 levels - first chart.

Source: Bloomberg

  • Using WTI as a crude proxy for the ToT, the second chart below shows how correlation with the JPM CAD broad nominal effective exchange rate sits at +0.2, low but not unprecedented.
  • In noting “I was reading some commentary yesterday, there is an expectation for the Canadian dollar to go up, we will see if that happens. It would be nice to get that buffer”, it was possible in reference to medium-term constructive views for CAD from Barclays and ING or similar, with the latter looking for 1.25 by early next year but with external woes dominating in the near term (per our BOC Review)

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