GS say long AUD and CAD against the US dollar remains their preferred way "to express our above-consensus global growth views in G10 FX".
Specifically on Canada:
- The virus remains relatively well-controlled in Canada, and vaccinations are underway. Recent delays to vaccine deliveries reflect only temporary supply constraints, as a production plant is re-tooled to boost capacity, and some provinces have reversed earlier decisions to hold back second doses, which initially resulted in a comparatively slow distribution
- Our above-consensus growth views should also support a continued rally in oil prices in 2021, reinforced by additional fiscal stimulus in the US, benefiting CAD and currencies of other oil-exporters
- the relative monetary policy outlook should also favour CAD in the medium-term. Bank of Canada ... statement hinted at upcoming tapering, provided the economy and inflation play out broadly in line or stronger than projected.
- We think the signal is consistent with our forecast for tapering in Q3 of this year, earlier than our expectation for Fed tapering in early 2022
- We also continue to expect BoC liftoff in Q2 2024, and see risks skewed closer to the BoC's 2023 timeline.
