CAD/ZAR Outlook:
The CAD/ZAR pair is likely to decrease, as the rate is currently trading significantly below its recent average and near 7-day lows. This bearish outlook is largely influenced by economic pressures from Canadian retail performance and ongoing trade tensions.
Key drivers:
• Rate gap: The Bank of Canada remains cautious with interest rate cuts, contrasting the South African Reserve Bank's recent reduction, which supports the ZAR.
• Risk/commodities: Oil prices are currently elevated, with Brent Crude OIL/USD trading well above its average, which typically strengthens the CAD; however, this has not yet translated into gains for the loonie.
• One macro factor: Ongoing trade tensions with the U.S. have added further pressure on the CAD, undermining investor confidence.
Range:
The CAD/ZAR is likely to drift within its recent 3-month range, with a clear possibility of testing lower extremes given the current pressures.
What could change it:
• Upside risk: A significant rise in oil prices could boost the Canadian economy and strengthen the CAD.
• Downside risk: Additional trade sanctions or negative economic data from Canada could diminish the CAD's value further.
