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CANADA: JPM USDCAD Scenarios Under Tariffs

CANADA
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JPMorgan look at USDCAD in different tariff scenarios considering there has been limited reported progress on Canada defusing the risk of 25% tariffs from the US. 

  • USDCAD breaches 1.50 on initial delivery of 25% tariffs. “Temporary tariffs and/or carve-outs (e.g., energy) could temper immediate impact all else equal, alongside short-CAD positioning.”
  • “1.55-1.58 is consistent with full pass-through from our USD tariffs beta [with permanent tariffs and no carve-outs]. Higher recession risks and an aggressive BoC response add to downside risks to CAD.”
  • “But those elevated USD/CAD targets could prove temporary. Negative spillover back to the US that drags on US growth and/or yields could impact the USD leg, providing some eventual offset to higher USD/CAD estimates.”
  • “USD/CAD sub-1.40 is possible if no tariffs are ultimately introduced, risk premium is depriced, CAD shorts are trimmed, and less trade uncertainty allows other improving domestic factors to boost CAD.”

 

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JPMorgan look at USDCAD in different tariff scenarios considering there has been limited reported progress on Canada defusing the risk of 25% tariffs from the US. 

  • USDCAD breaches 1.50 on initial delivery of 25% tariffs. “Temporary tariffs and/or carve-outs (e.g., energy) could temper immediate impact all else equal, alongside short-CAD positioning.”
  • “1.55-1.58 is consistent with full pass-through from our USD tariffs beta [with permanent tariffs and no carve-outs]. Higher recession risks and an aggressive BoC response add to downside risks to CAD.”
  • “But those elevated USD/CAD targets could prove temporary. Negative spillover back to the US that drags on US growth and/or yields could impact the USD leg, providing some eventual offset to higher USD/CAD estimates.”
  • “USD/CAD sub-1.40 is possible if no tariffs are ultimately introduced, risk premium is depriced, CAD shorts are trimmed, and less trade uncertainty allows other improving domestic factors to boost CAD.”