Lower Fed rates will help CAD extend recent modest gains – SocGen

With the potential for Fed rate cuts, the Canadian Dollar (CAD) is set to extend its gains, economists at Société Générale report.

Scandies are due for rehabilitation

The most interest rate sensitive developed-economy currencies are the ones sensitive to housing.

Lower Fed rates will help CAD extend recent modest gains and should also help SEK and NOK recover after a dire performance as rates rose.

The Scandinavian currencies will over-react to every twist and turn in risk sentiment, and NOK will remain sensitive to oil prices, but over time, both are due rehabilitation. If nothing else, they have gone very expensive tourist destinations to much more affordable ones, which will further help already sizeable current account surpluses, especially when Northern Hemisphere evenings start to lengthen on the fjords.