Morgan Stanley Flag AUD/CAD Upside Potential

Morgan Stanley see “room for AUD/CAD to gain over the coming months as yield differentials move in Australia's favour relative to Canada and commodity prices rise. However, the risk demand outlook is a key source of uncertainty for the pair.”

• “Our high frequency fair value model indicates that movements in AUD/CAD are well explained by movements in 2y Australian-Canadian yield differentials, copper prices, S&P futures, and 2y US Treasury yields.”
• “Our model suggests AUD/CAD is trading somewhat cheap to recent moves in highly correlated assets and we see room for these assets to continue moving in an AUD/CAD positive direction.”