CAD/NZD Outlook: The outlook is slightly weaker, but likely to move sideways, given that the rate is below its recent average and within its mid-range.
Key drivers:
• Rate gap: The Bank of Canada maintains a neutral stance on interest rates, while the Reserve Bank of New Zealand has lowered rates, creating a favorable environment for the NZD.
• Risk/commodities: Oil prices have risen significantly, benefiting the CAD, but global trade tensions continue to weigh on it.
• One macro factor: The U.S. tariffs on Canadian goods have led to a substantial drop in exports, impacting the CAD negatively.
Range: CAD/NZD is likely to hold within its recent range, with limited volatility expected.
What could change it:
• Upside risk: A surprise rate hold or hike by the Bank of Canada could support the CAD's strength.
• Downside risk: Further deterioration in trade relations or oil price corrections could put additional pressure on the CAD.