DOWNSIDE RISKS TO THE EUR IN THE MONTHS AHEAD, BUT CAD LIKELY TO STRENGTHEN MODESTLY – HSBC

Domestic macro developments may see downside risks to the Euro (EUR), but upside risks for the Canadian Dollar (CAD), in the view of economists at HSBC.

EUR likely to weaken modestly against the USD in the months ahead

The USD/CAD seems to have started tracking its rate differentials again. We still expect the pair to grind lower over the course of the year, as the domestic growth-inflation mix and the possibility of more fiscal stimulus in Canada over the next three years would add cyclical support to the CAD.

The EUR is likely to weaken modestly against the USD in the months ahead, amid slowing improvement in the Eurozone’s external balances, and alongside continued economic disappointments in the region.