We would be short USD/CAD – Nomura

Nomura Global FX Strategy team prefers to be short on USD/CAD as the pair is at the mercy of oil prices and US rates going forward.

Key quotes

With the BoC likely to remain on hold owing to the increase in fiscal spending, any expectations of rate cuts are likely to be priced out from the rates market following the announcement of the increase in fiscal stimulus, placing some downward pressure on USD/CAD. With the BoC on the sidelines, this means the cross will be more likely influenced by oil prices and US rates going forward.

In addition, we believe that GDP for August could surprise to the upside. We expect the economy to have expanded by 0.3% m-o-m, slightly above consensus, and believe that the risks are tilted to the upside. With record US oil imports from Canada in August and other data pointing to a sharp increase in Canadian production, we could see another month of strong expansion in oil and gas.