CAD/NZD Outlook:
Bearish, as the rate is below its recent average and near recent lows, influenced by trade tensions impacting the CAD.
Key drivers:
• Rate gap: The Bank of Canada maintains a cautious monetary policy, while the Reserve Bank of New Zealand signals potential interest rate cuts, leading to a widening differential favoring the NZD.
• Risk/commodities: Although oil prices are at recent highs, the Canadian dollar remains under pressure due to heightened U.S.-Canada trade tensions, limiting benefits from rising oil prices.
• Macro factor: New Zealand's recent lifting of U.S. tariffs on major exports has bolstered its economic outlook, placing upward pressure on the NZD.
Range:
The CAD/NZD is likely to drift further below its recent average, with potential to test recent lows.
What could change it:
• Upside risk: A significant drop in global oil prices could weaken NZD support from commodities and favor the CAD.
• Downside risk: Continued escalations in U.S.-Canada trade tensions could further diminish the CAD's appeal.
