CAD will fall further, AUD set to move higher

Canadian Dollar

We have seen extreme volatility in the past 3 months. Run up to the upper 1.30's down to lows of 1.20. We are still in the scenario where rate spreads are negatively affecting Canada. We have seen the Canadian Bond market outperforming as of late. Jeremy Stretch, Head of G10 FX for CIBC believes the Canadian Bond market has further to run; so this suggests that the CAD has further downside.

Markets are still long Canadian Dollar, there is however a need to clear out some of those positions. The Bank of Canada are on hold with more rate moves until April/May next year. That will allow us to see the Canadian Dollar under perform.

Australian Dollar​

We have seen a market which has been looking for a degree ​of repreciation. We have seen the market is relatively relaxed about the RBA outlook. Looking at some of the comments from Governor Lowe, it does not seem as though he believes the rates need to move in the short term. He is discussing the necessity to monitor wages, this is a factor that will come up in the next 3 to 6 months.

Markets are underplaying the probability of a possibility that the RBA will be forced to consider undertaking a tightening of the markets than the markets are currently discounting. In a world where we are looking for global synchronised growth, countries which are open and commodity oriented will benefit. The current levels look cheap. AUD is looking very bullish.

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