Canadian dollar into positive territory
If I were to describe the market's view of the global economy right now it would be that it's slowing but that the US is poised to outperform.
That view leaves Canada in an odd spot. It's obviously heavily tied to the global economy via the resource sector but it's arguably even more tied to the US via everything else.
Canada is also in the rare global spot of having considerable fiscal firepower and some room on interest rates before any talk of QE.
All that helps to explain why the loonie has been such a good performer this year but it also doesn't exactly weave a compelling narrative going forward. What would?
There's an election in October that's going to be interesting but the real linchpin is oil. Canadian oil producers have been killed on pipeline issues and a total lack of confidence in the industry. They're trading at the lowest multiples of any developed market oil companies.
A rise to $60 or $65 in WTI would light a fire under some of those names an spark some inflows. I don't think that would be enough to reverse sentiment, but it would get USD/CAD below 1.30.
