HSBC Strategists Stick by Bearish CAD Call Despite Trade Impasse

HSBC strategists are maintaining their bearish stance on the Canadian Dollar (CAD) despite a recent breakdown in US-Canada trade talks. The news flow had shown signs of improvement just over a week ago, but the current impasse is unlikely to be a persistent drag on the currency.

The breakdown in US-Canada trade talks has driven USD/CAD higher, but HSBC strategists argue that these risks are largely priced in. They point out that the trade dispute currently only affects 5% of Canada's exports to the US and may not have a significant impact on the overall economy.

The strategists also highlight that broader Dollar moves and 2-year yield differentials point to only modest further USD/CAD upside. While they acknowledge that there is scope for the trade dispute to widen, they believe that this risk is already well understood and therefore likely priced in by markets.