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 walks us through recent developments on the tariff front and their implications on his Canadian Dollar forecast.
On April 2, reciprocal tariffs were applied to numerous US trading partners, rattling market confidence (mostly in the US), moving stocks sharply lower while US yields moved sharply higher. However, implications for Canada (and Mexico) were more positive as no new reciprocal tariffs were applied. This has lessened the correlation of equities as the primary driver of USDCAD, with general USD direction now having a slightly greater impact. The result of global tariffs has been a rise in 10 year yields by 65 bps and a 15% decrease in US stocks, with USDCAD falling ~1.5%.
Another development is that USDCAD has been less sensitive to each successive tariff deadline and its reluctance to move above the 1.4500 level sheds a positive light on George’s forecast for this month. George sees USDCAD moving toward 1.3900 at the end of June, ending the year around 1.3700, with an expected trading range 1.3900 to 1.4400 for the month ahead.