CAD/JPY Outlook:
Slightly positive, but likely to move sideways, as the rate is above its recent average without a clear driving factor.
Key drivers:
• Rate gap: The Bank of Canada has maintained a cautious stance, while the Bank of Japan recently raised interest rates, creating a widening difference between the two currencies.
• Risk/commodities: The Canadian dollar is influenced negatively by fluctuations in oil prices; despite oil trading above its average, recent volatility has created uncertainty.
• Macro factor: Japan's ongoing inflation issues and the central bank's tightening measures are impacting the yen, making it less predictable against other currencies like CAD.
Range:
Expect CAD/JPY to hold steady within the recent trading range, respecting the stability observed over the past months.
What could change it:
• Upside risk: A rebound in oil prices beyond recent highs could boost the Canadian dollar.
• Downside risk: A further decline in oil prices or extended weakness in Canada's economic data might weaken the CAD.
