USD/CAD: downside favoured on fundamentals - Scotiabank

Analysts at Scotiabank noted that the Bank of Canada rate expectations are firming in response to Monday’s Bank of Canada Business Outlook Survey and OIS are once again fully pricing a 25bpt hike for next Wednesday and another 25bpt hike by March.

Key Quotes:

"The price of Western Canada Select is also recovering and narrowing the spread to WTI/Brent."

"CAD correlations have shifted and currently favor oil and commodities over yield spreads."

"The broader tone is therefore critical, and measures of CAD sentiment remain tentative with 1Y risk reversals hovering just below their recent 15 month highs."