8 Apr 2014
USD/CAD lower on politics and low risk sentiment - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities noted how the Loonie has reacted to yesterdays defat of the Parti Québécois while markets have off loaded the dollar else where.
Key Quotes
"USD/CAD has traded lower overnight following yesterday’s resounding defeat of the Parti Québécois. The Liberals took 70 seats in the 125 seat National Assembly, securing a majority government. The Parti Québécois was a distant second with 30, the Coalition Avenir Québec 22, and Québec Solidaire three."
"This outcome removes the risk that a majority PQ government would pursue a sovereignty push at some point in the next few years. The PQ tried to make the campaign about something other than the sovereignty issue but found it hard to get away from it – early on, PQ leader Marois said that she would not rule out a referendum if re-elected – and that appears to have been a voter turn-off."
"The CAD had strengthened modestly since the election call was made, so investors did not appear to have priced in any “sovereignty risk”, especially with the Liberals appearing progressively stronger in the surveys ahead of the polls. At the margin, with the result consummated, the market overnight has been a little more inclined to buy the CAD and pushed funds to 1.0924."
"We do not think the developments in Quebec constitute a green light for aggressive buying. Although the threat of a referendum on sovereignty has been crushed, realistically, it was not that high to begin with. However, given the moves observed thus far today, there is a risk of a push to 1.0900/10 now and the heightened potential of a technical extension to the low 1.07s in the coming days."
Key Quotes
"USD/CAD has traded lower overnight following yesterday’s resounding defeat of the Parti Québécois. The Liberals took 70 seats in the 125 seat National Assembly, securing a majority government. The Parti Québécois was a distant second with 30, the Coalition Avenir Québec 22, and Québec Solidaire three."
"This outcome removes the risk that a majority PQ government would pursue a sovereignty push at some point in the next few years. The PQ tried to make the campaign about something other than the sovereignty issue but found it hard to get away from it – early on, PQ leader Marois said that she would not rule out a referendum if re-elected – and that appears to have been a voter turn-off."
"The CAD had strengthened modestly since the election call was made, so investors did not appear to have priced in any “sovereignty risk”, especially with the Liberals appearing progressively stronger in the surveys ahead of the polls. At the margin, with the result consummated, the market overnight has been a little more inclined to buy the CAD and pushed funds to 1.0924."
"We do not think the developments in Quebec constitute a green light for aggressive buying. Although the threat of a referendum on sovereignty has been crushed, realistically, it was not that high to begin with. However, given the moves observed thus far today, there is a risk of a push to 1.0900/10 now and the heightened potential of a technical extension to the low 1.07s in the coming days."