CAD/AUD Outlook: Likely to decrease, as the rate is below its recent average and facing downward pressure from key developments in the Canadian economy.
Key drivers:
• Rate gap: The Bank of Canada recently cut interest rates, positioning them lower than the Reserve Bank of Australia's potential hikes next year, which may favor the AUD.
• Risk/commodities: Oil prices are currently above their average, but with rising volatility, the softer trend in oil could weaken the CAD further, affecting its competitiveness.
• One macro factor: Trade tensions, particularly U.S. tariffs on Canadian exports, have severely impacted the CAD, leading to a notable drop in exports and broader economic challenges.
Range: CAD/AUD is expected to drift lower as it remains near recent lows, struggling to recover within its established range.
What could change it:
• Upside risk: A sudden increase in oil prices could bolster the CAD, improving its appeal.
• Downside risk: Continued declines in Canadian exports or further interest rate cuts by the Bank of Canada could further weaken the CAD against the AUD.
