Short AUD/CAD as we head into 2016 – RBC CM

By FXStreet FXStreet (Delhi) – Research Team at RBC Capital Markets, suggests to short the AUD/CAD pair in 2016.

Key Quotes

“Net exportsias a key hope for growth. Since it peaked in March 2013, trade-weighted AUD has fallen by 21%. Over a similar time period, trade-weighted CAD is down by a similar amount (-24% since Sept 2012). Despite the sharp currency depreciations, non-commodity exports have been slow to materialize. Nevertheless, in Canada there are signs that non-commodity exports are beginning to pick up and Canada is gaining market share in global trade, while in Australia, non-commodity exports are still lagging.”

“In the first half of 2016, short AUD/CAD could also feel the benefit from a weather phenomenon – El Niño. The UN’s World Meteorological Organization has said this year’s El Niño is on track to be among the “worst ever”. A strong El Niño is expected to bring drought to large parts of the Southern hemisphere including Australia and New Zealand which would push up soft commodity prices. But the effect is negative for AUD and NZD, as the hit to production outweighs the benefit of higher prices. Meanwhile El Niño is growth enhancing for the US, Canada and Europe.”

“Short AUD/CAD may be helped at …read more

Source:: FX Street