CAD/CNY Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and trading near recent lows despite some favorable conditions.
Key drivers:
• Rate gap: The Bank of Canada is maintaining a steady policy rate while the People's Bank of China is implementing measures to stimulate credit, influencing the Canadian dollar negatively against the yuan.
• Risk/commodities: Falling oil prices are putting pressure on the Canadian dollar, given its reliance on oil exports; the current rate is significantly impacted by oil's recent corrective movements.
• One macro factor: Recent trade developments between Canada and China, including reduced tariffs on agricultural products, may provide some support for the loonie.
Range: Movement is likely to hold within the recent 3-month range, as the rate is already near the lower end of this spectrum.
What could change it:
• Upside risk: A significant rebound in global oil prices could strengthen the CAD.
• Downside risk: Continued pressure on oil prices or negative U.S.-Canada trade developments could drive the CAD further down.
