CAD: 3 Reasons Why Risk Still Skewed To The Downside - Credit Agricole

Several factors suggest CAD risks are still skewed to the downside.

First, the sharp reversal in CAD/USD makes the currency prone to some payback, in our view, and markets are still short on net.

Second, we do not hold the view that oil has found a bottom, as the recent moves higher are at odds with oil market fundamentals.

Finally, the Canadian economy remains on an uncertain path given intact weakness in the oil sector. Q1 data received in the coming months will be important in this regard in highlighting the economic impacts from the latest oil drop.

This week’s calendar is busy with releases, the most notable being manufacturing sales (Wednesday) and retail sales and CPI (Friday). Inflation is likely to moderate on energy prices, while the former two data releases are key to assessing how well domestic demand conditions have recovered after a weak Q4. 

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