USD/CAD: 1.40 is a floor for 2020 – TDS

Analysts at TD Securities think USD/CAD is likely to maintain a 1.42-1.47 range over the coming months given the one-two punch of the global growth and oil shock. They add the market could try to retest the critical 1.50 level, as oil and leverage make the Canadian economy quite sensitive to the recent turn of events.

Key Quotes: 

“The one-two punch of the regime shift in oil coupled with the CV-19 shock to the global economy has exposed CAD's critical vulnerabilities. The global demand shock (and remnants of a 2008-style credit crunch) have exposed the leverage concerns that have bubbled under the surface for years. It's unlikely to spillover into a systematic issue but a full stop of consumer spending will dent the housing market along with other collateral damage.” 

“The oil shock has pushed the price of WCS below transport costs, adding pressure to an already weak system. Combined this backdrop plus a current account deficit implies that 1.40 is a floor for 2020.”