CAD/CNY Outlook: The CAD/CNY exchange rate is slightly positive, moving sideways, as it is just above the 90-day average and trading near recent highs, but lacks a clear driver for a significant move.
Key drivers:
• Rate gap: The Bank of Canada's recent interest rate policy indicates stability, while the People's Bank of China aims to support the yuan by absorbing excess liquidity, creating pressure on the CAD/CNY rate dynamic.
• Risk/commodities: Oil prices have shown volatility, currently trading above their 3-month average, which generally supports the Canadian dollar's strength against the yuan, though oversupply concerns remain.
• One macro factor: China's ongoing stimulus efforts and a recent indication of stronger-than-expected economic growth bolster confidence in the yuan, impacting its exchange rate.
Range: The CAD/CNY rate is likely to test the upper end of its recent 3-month trading range.
What could change it:
• Upside risk: A rebound in global oil prices could significantly strengthen the Canadian dollar.
• Downside risk: A deterioration in trade relations between Canada and the U.S. could negatively affect the CAD, pushing it lower against the yuan.