The Canadian dollar had a weak hand from the very start and there are more reasons to bearish on the loonie:

Here is their view, courtesy of eFXnews:

Trump’s victory in the US Presidential election is reinforcing our bearish view on the CAD. Although resilient risk sentiment appears to be supporting the G10 commodity-bloc currencies to some extent, rising US yields should push USD/CAD higher. Longer-term, there are clear concerns over the protectionist rhetoric of the incoming US President.

To the extent that Trump has consistently targeted the NAFTA trade agreement (78% of Canadian exports go to NAFTA countries), the possibility of trade disputes would warrant a cautious outlook on the Canadian economy and be a risk premium on the CAD in 2017. Trump has also been a vocal supporter of ramping up US oil production, which does not bode well for the medium-term outlook for crude prices.

Back to the immediate agenda and the October Canadian CPI release will be a key data point this week. Core inflation has come down from above 2% YoY to 1.8% YoY recently amid persistent economic slack and the fading impact of past CAD appreciation (core inflation would be near 1.6% without the FX impact, according to the BoC). Note that with the recent renewal of the BoC’s inflation targeting mandate, the inflation target will remain at the 2% midpoint of the 1%-3% inflation control range. The Bank also decided that starting in January 2017, it would cease using CPIX as its preferred measure of core inflation and focus instead on three new measures – CPI-common, CPI-trim and CPI-median.

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