CAD Softer Amid Weak Risk Appetite
Markets are nudging the Canadian Dollar (CAD) lower this morning due to weak risk appetite, although CAD losses remain more moderate compared to other high beta and commodity currencies, according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Bank of Canada Remarks
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 "no surprises" Federal budget shortly after 4 p.m. Many core elements of the government’s fiscal plans are already known.
Government Spending and Trade Challenges
- Increased spending on defense, housing, and infrastructure projects.
- Spending cuts to address economic challenges stemming from US trade policies.
Note the US Supreme Court will hear arguments on the legality of President Trump’s use of emergency powers to impose tariffs Wednesday. A decision is unlikely before early next year (February) at this point.
Canadian trade data remain delayed due to the US government shutdown, as both countries rely on reciprocal import data to compile trade balances.
USD/CAD Technical Levels
Spot gains are approaching the 1.4080 high from mid-October, which is the main resistance before USD gains potentially move toward the mid-1.41 range with retracement resistance at 1.4160. Intraday support for USD is around 1.4040–1.4050. For USD/CAD losses to deepen, the pair needs to extend below 1.
Summary: The Canadian Dollar faces moderate pressure amid cautious risk appetite and trade disruption concerns, with limited monetary policy options and fiscal strategies focusing on defense and infrastructure balancing economic challenges.