CAD/ZAR Outlook: Likely to decrease as the rate is below its recent average and facing pressure from lower oil prices.
Key drivers:
• Rate gap: The Bank of Canada has recently cut rates, while the South African Reserve Bank has lowered its rate too, but the ZAR is currently benefiting more from improved economic fundamentals.
• Risk/commodities: Recent declines in oil prices have hindered the CAD, which is closely tied to oil exports and prices.
• One macro factor: The uncertainty around Canadian trade policies, particularly with tariffs affecting exports, is adding further strain to the CAD.
Range: CAD/ZAR is expected to drift within its recent range, with a potential to test lower extremes if current pressures continue.
What could change it:
• Upside risk: A significant bounce back in oil prices could support a recovery in the CAD.
• Downside risk: Continued weakness in Canadian exports due to trade tensions may further weaken the CAD against the ZAR.