Commodity bloc vulnerable after strong start to the year - BNPP

Research Team at BNP Paribas thinks that both AUDUSD and USDCAD are at risk to a resumption of USD strength or a turn weaker in the global risk environment.

Key Quotes

“The CAD has additional vulnerability heading into this week’s Bank of Canada meeting. Our economics team thinks the Bank will deliver a final 25bp rate cut this week as the Bank seeks to avoid a tightening of financial conditions while activity remains soft, in contrast to market pricing and consensus forecasts calling for unchanged policy. If a rate cut is delivered, we would expect USDCAD to move quickly towards our 1.36 three-month target, but even steady policy will leave the CAD vulnerable in the context of gradually rising US rates. We remain positioned for USDCAD gains via a 1.34/1.36 call spread recommendation.”