Mid-Week Market Observations: Canadian Dollar, Canadian Banks, Canadian Pipelines

Posted by Brent Woyat - Canaccord Genuity

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Screen Shot 2015-11-27 at 11.09.26 AM

Screen Shot 2015-11-27 at 11.09.26 AM

Looking out to 2016, our hunch remains that the CDN$ could perform a counter-trend rally à la 1999 (Figure 2) and take the CDN$ back to PPP as global crude oil markets rebalance. That being said, long-term investors may not want to hedge their foreign currency exposure just yet. Figure 3 shows that the CDN$ is unlikely to reach a secular bottom until Canada’s current account turns into a surplus. We are years away from this turnaround.