CAD/JPY Outlook:
The CAD/JPY exchange rate is slightly positive, likely to move sideways as it sits just above its 90-day average but lacks a clear driver. With Canada’s GDP data pending, further fluctuations could emerge.
Key drivers:
• Rate gap: The Bank of Canada is maintaining a tighter monetary policy compared to the Bank of Japan, which continues with low interest rates.
• Risk/commodities: Oil prices are currently above their average, which supports the Canadian dollar as Canada is a major oil exporter.
• One macro factor: The upcoming fourth-quarter GDP data may reveal contraction in economic growth, potentially placing downward pressure on the CAD.
Range:
Expect the CAD/JPY to hold within its recent trading range of 111.0 to 115.3.
What could change it:
• Upside risk: A strong GDP report could boost the CAD significantly.
• Downside risk: Weak growth figures or further declines in oil prices could negatively impact the CAD.