Canadian Dollar Defies Expectations

The Canadian Dollar has continued to defy expectations by not breaking lower against the US dollar. According to Scotiabank, this resilience is impressive and suggests that there is limited downside potential in the CAD currently.

Despite volatile Fed expectations and renewed trade uncertainty, the Canadian Dollar has held up well. The bank's equilibrium estimate has edged up to 1.3920 due to widened front-end US-Canada swap spreads.

The rate gap remains a concern for a stronger Canadian Dollar, but Scotiabank sees scope for gains as curtailed by this wide differential.