ABN Amro sees Bank of Canada shifting rhetoric
Analysts at ABN Amro says they "have become much more bearish on the Canadian dollar" because of a slower recovery in oil prices.
They see dismal business investment in oil sands projects and divergent Fed monetary policy boosting USD/CAD to 1.48 at year end.
"We no longer expect the BoC to tighten monetary policy in late 2016. Nevertheless, the extent of depreciation in the CAD is likely to be smaller than in 2015 as speculators' net short positions in the CAD are getting overcrowded. Furthermore, technical indicators imply that the bearish sentiment in recent months are overdone and hence the pace of depreciation in the CAD is unlikely to persist. Our 2017 year end USD/CAD forecasts have also been raised from 1.25 to 1.30," they write.
Bank of Canada decision Jan 20
ABN Amro had been expecting a Bank of Canada rate cut late in the year but they've moved that forecast up to April.
"We expect the Bank of Canada (BoC) to turn dovish in the next monetary policy meeting on 20 January. The BoC is likely to highlight that downside risks to their economic growth projections made in October 2015 have increased," they write, adding that a cut next week can't be ruled out.
