CAD/AUD Outlook:
The CAD/AUD exchange rate is likely to decrease as it currently trades well below its recent average and is near its recent lows. The Canadian dollar faces significant pressure, driven by ongoing economic challenges.
Key drivers:
• Rate gap: The Bank of Canada's lower interest rate contrasts with Australia's monetary outlook, favoring the AUD.
• Risk/commodities: Rising oil prices can support the CAD, but the recent volatility suggests limited positive impact amid broader economic concerns.
• One macro factor: The Australian job market remains strong, which raises expectations for further interest rate hikes by the Reserve Bank of Australia.
Range:
Expect the CAD/AUD to test its recent lows and remain within a stable range without significant movement in either direction.
What could change it:
• Upside risk: A surprising increase in Canadian retail sales could boost CAD against AUD.
• Downside risk: Further deterioration in Canada’s trade relations, particularly with the U.S., could exacerbate CAD weakness.
