CAD Softens Amid Weak Risk Appetite
Weak risk appetite is pressuring the Canadian Dollar (CAD) lower this morning. However, the CAD's decline is more moderate compared to other high-beta or commodity-linked currencies, according to Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret.
Bank of Canada and Fiscal Policy Comments
Bank of Canada Governor Macklem’s recent remarks reaffirmed the message from last week’s policy decision. Monetary policy remains somewhat stimulative, but there are limits to how much the BoC can counteract trade-related headwinds.
"BoC Governor Macklem’s remarks yesterday afternoon stayed on the messaging delivered after last week’s policy decision. Monetary policy is somewhat 'stimulative' but there were limits on what the BoC can do to offset the headwinds from trade turmoil."
Finance Minister Champagne is set to present a "no surprises" Federal budget shortly after 4pm. Key elements of the government’s fiscal plans are already public.
"There will be more spending on defence, housing and infrastructure projects on the one hand and spending cuts on the other in response to the economic challenges thrown up by US trade policy."
Trade and Legal Developments Affecting CAD
The US Supreme Court will hear arguments on the legality of President Trump’s use of emergency powers to impose tariffs this Wednesday. A decision is not expected before early next year (February).
Canadian trade data are currently delayed due to the US government shutdown, as both countries rely on reciprocal import data to calculate trade balances.
Currency Levels and Technical Support
USD/CAD spot prices are nearing the 1.4080 level from mid-October, the main resistance point before gains extend to the mid-1.41 range and further retracement resistance at 1.4160. Intraday support lies between 1.4040 and 1.4050. To continue losses, USD/CAD needs to break below 1.40.
"Spot gains are closing in on the 1.4080 high from mid-October that stands as the only obvious resistance point to USD gains extending to the mid-1.41 range and retracement resistance at 1.4160. Intraday support is 1.4040/50 for the USD."
Author’s summary: The Canadian Dollar faces moderate pressure due to weak risk appetite and trade tensions, with cautious market attention on Bank of Canada policy and upcoming US legal decisions on tariffs.