Canadian Dollar Steady as Market Turns Cautiously Bullish – Scotiabank

Canadian Dollar Steady as Market Turns Cautiously Bullish – Scotiabank

The Canadian Dollar (CAD) is holding steady on Thursday, showing modest softness primarily due to a slight overall gain in the US Dollar (USD). According to Scotiabank’s Chief FX Strategist Shaun Osborne, USD/CAD spot levels remain close to the bank’s fair value estimate of 1.3845, while overall sentiment toward the CAD is becoming more bullish.

This shift is partly attributed to growing pessimism around the US Dollar. Notably, risk reversal premiums for USD/CAD have shown a sharp move, with 3-month options reflecting a 24 basis point premium for USD puts over calls—the widest seen since 2009. Similar patterns are observed in other tenors, indicating rising investor interest in downside protection for USD/CAD.

Osborne also highlights that this trend mirrors broader FX markets but is particularly unusual for CAD, emphasizing how bearish positioning on the USD is gaining momentum.

The Bank of Canada’s Governor Tiff Macklem and Finance Minister François-Philippe Champagne are scheduled for a joint press conference later today, following the Banff G7 meeting. While they are expected to address international topics, questions may touch on domestic inflation and rate outlooks.

Despite high April core inflation figures making a June BoC rate cut unlikely, Governor Macklem is not expected to comment on short-term monetary policy. A lack of guidance may lead markets to further reduce their expectations for near-term easing.