Trump presidency and its implications for Canada - TDS

Research Team at TDS, suggests that there are important risks to the Canadian economic outlook from election of President Trump.

Key Quotes

“We raise our odds for a December cut from the BoC from 20% to 33%, and keep January still below 50%, pending the sustained reactions in CAD, clarity on key US policy issues such as NAFTA, and the evolution of Canadian domestic data.

FX Implications

The uncertain path of US business investment, dampened Canadian trade prospects and renewed prospects for a BoC rate cut in the coming months are key headwinds for the CAD.  Keep in mind, the impact of the US election is a process – not an event. For majors currencies, the crucial issues will center around US fiscal expansion versus trade protectionism.  We suspect both issues are negative for CAD.  This view reflects the fact that fiscal expansion could amplify the USD rally, leading to a further divergence between the Fed and BoC. On the trade side, disruption of trade relations between the US and Canada would accelerate the structural issues plaguing CAD.  All told, our bias is to expect further CAD weakness and we look to add on dips towards 1.3370/3400. The overnight high of 1.3525 provides an initial target ahead of 1.3650.”