HALISTER1: UBS Raises USD/CAD Forecast on Inflation, Yields, Cheaper Oil

UBS Raises USD/CAD Forecast on Inflation, Yields, Cheaper Oil

(Bloomberg) -- UBS revises year-end forecast to 1.36 from 1.25 as cheaper oil is negative for CAD, along with risk of lower inflation readings, FX strategist Jeff Greenberg writes in note received today.
  • Says the ~17% chance of a BOC rate cut priced for January is too low
  • Investors may not fully appreciate downside risks CAD and housing pose for inflation
    • Changes in housing policy lower the bar for BOC action
  • Inflation data on Nov. 18, Dec. 22, will be critical for BOC; downside surprises could prompt trimming of forecasts and rate cut as soon as January
  • Spread between USD and CAD yields has widened, overtaking crude as main driver of USD/CAD
  • USD/CAD steady after rising 5 days; at 1.3408
  • Brent crude futures +1.0% to $48.79bbl
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Jeff Greenberg (UBS Asset Management Japan Ltd)

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