Buy EUR/CAD on Trump win – SocGen

Alvin T. Tan, Research Analyst at Societe Generale, suggests that the Trump win has upended market expectations and in an echo of the UK Brexit referendum, the conventional wisdom and opinion polls were overturned.

Key Quotes

“We see the market fading expectations of a Fed rate hike in December, and this should give the euro a boost. Elevated global market volatility should also be supportive of the euro as the Euro area’s current account surplus provides the region with a fundamental buffer against that volatility.”

“On the other hand, Canada is highly exposed to any protectionist tilt in the US. Around three quarters of Canadian exports are shipped to the US, and the second export destination, China, trails far behind at around 4% of exports. Two-thirds of Canadian imports also come from the US. While Trump has not mentioned building any walls on the border with Canada, any threat to NAFTA would be damaging to the Canadian economy.”

“Thus, the loonie is expected to come under further pressure until President-elect Trump clarifies his assertion that he would “renegotiate” NAFTA. Go long spot EUR/CAD 1.4850, targeting 1.55 initially with a stop at 1.4550.”