We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment George expands on the topic of tariffs and relays his current thoughts regarding the impact on the Canadian dollar.
The absence of clarity on the tariff front will likely limit CAD strength going forward. He notes the CAD depreciation when tariffs were first mentioned back in November and the reversal that took place in February when tariffs were put on hold for 30 days. This illustrates how vulnerable the Canadian dollar is to any tariff related headlines. The lack of any specifics regarding the tariff situation raises three important issues before their effects can be assessed: what will the size or percentage of tariffs be; will the tariffs imposed be broad-based or targeted to specific sectors; how long will the tariffs last.
Next, George undertakes a scenario analysis regarding the potential tariff situation and how it relates to currency volatility and economic growth. With so many unknowns regarding the tariff situation, the expected trading range for the month ahead remains on the defensive from 1.4100 to 1.4600 with volatility expected around any tariff related headlines.