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"The CAD has remained on the sidelines of the recent USD sell-off. While CAD's daily correlation with oil has weakened, crude's further decline has prevented the CAD from strengthening over the past two weeks. Further downside may be limited from here but conditions for a rebound are also lacking in our view, which implies that oil will not be offering much support to the Canadian economy and currency soon.
Meanwhile, the BoC will likely remain in a wait-and-see mode at least until it sees Q3 data. We think policymakers may be excessively optimistic on the impact of fiscal spending while a combination of a neutral policy stance and falling inflation expectations may trigger an unwanted tightening in real rates in Canada. Furthermore an over-leveraged consumer and further signs of housing market excesses in BC are paradoxically helping CAD by restraining the BoC in the short-term but they are a looming risk to the economy and currency over the medium-term.
We continue to see risks as largely favouring USD/CAD upside from current levels" - efxnews.
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