S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
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Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
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IPC Index — Mexico Market
Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) remains soft but broadly stable, with USD/CAD trading near 1.3850. They highlight that CAD is undervalued versus their fair value estimate around 1.3690, but recent shifts in Bank of Canada (BoC) expectations and wider short-term spreads favour the US Dollar (USD). They see USD/CAD upside as limited toward the mid-1.38s unless a fresh CAD-negative catalyst emerges.
CAD undervaluation but capped USD/CAD gains
“The CAD is soft but little changed this morning. The CAD is “cheap” relative to our fundamental fair value assessment (1.3690 today) but factors have moved against the CAD through May as markets have repriced the BoC policy outlook somewhat and short-term spreads have widened in the USD’s favour.”
“More broadly, the CAD remains hampered but the uncertain trade outlook. The weak CAD valuation and a generally stretched-looking USD suggest limited upside potential for USD/CAD absent a new, CAD-negative catalyst.”
“Bearish—While the USD has edged a little higher this week so far, chart signals from last week remain clearly bearish (a daily key reversal signal last Thursday and a weekly “shooting star” candle signal).”
“USD gains to the mid-1.38s are meeting resistance, as expected, but there is admittedly no sign of a turn lower developing just yet.”
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