CAD Slips Through 1.41 – Scotiabank
The Canadian Dollar continues to weaken this morning, falling by about 0.2% against the US Dollar, according to Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret. The currency remains one of the weaker performers today.
Federal Budget Insights
“As expected, the Federal budget laid out significant spending on housing, defence, infrastructure and productivity and competitiveness, all aimed at boosting investment and lifting growth. The red ink spillage is significant, though with the current FY deficit forecast to rise to CAD78bn (well above the CAD42bn projected under the previous government back in December).”
The analysts noted that the increased deficit highlights a more ambitious fiscal plan compared to prior estimates, aiming to drive medium-term economic growth.
Political and Market Reaction
“The minority government will need help for the budget legislation to pass but another election seems very unlikely at this point. The CAD looks unimpressed and spot gains are deviating more significantly (well above one standard deviation) from our fair value estimate (1.3917) again.”
The market’s muted response indicates limited confidence in immediate economic benefits, as the Canadian Dollar continues to trade below its estimated fair value.
Technical Analysis on USD/CAD
“Spot dollar gains through the 1.4080 resistance point (now initial support) have been flagged as a risk for a while now and the USD’s progress through to the 1.41 handle this morning points to further appreciation to the 1.4160 area (50% retracement of the Feb/Jun decline in the USD at 1.4167).”
Analysts suggest that the recent breakout above 1.41 could pave the way for further USD strength, with potential upside targets near 1.4160–1.4167.
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Author’s summary: Scotiabank strategists note that a rising deficit and fiscal ambitions weigh on the Canadian Dollar, as USD gains break key resistance toward 1.4160.