CAD/AUD Outlook: Bearish, as the rate is below its recent average and near recent lows, pressured by domestic inflation and softer oil prices.
Key drivers:
• Rate gap: The Bank of Canada has reduced interest rates, which makes the Canadian Dollar less attractive compared to the Australian Dollar, where the Reserve Bank hints at potential rate hikes.
• Risk/commodities: Oil prices recently traded above average, but any sustained weakness may negatively affect the Canadian Dollar, as Canada exports a significant portion of its oil.
• One macro factor: The Canadian economy faces trade policy uncertainty with tariffs affecting exports, which could further weaken the CAD.
Range: CAD/AUD is likely to drift within its recent range, given current pressures on the loonie.
What could change it:
• Upside risk: A sharp rebound in oil prices could boost demand for CAD.
• Downside risk: Further negative economic data from Canada could lead to increased pressure on the loonie.
