Stay short AUD and CAD amid sell-off in risk assets
We think that staying short the AUD and CAD offers the best value in G10 FX amid the sell-off in risk assets. We remain long USDCAD and GBPAUD targeting 1.35 and 2.25 respectively. Despite WTI oil trading below $40/bbl for the first time since March 2009, markets have been reluctant to price in significant easing from commodity exporter central banks. We think that with the Fed now likely to remain on hold until December, there will be more pressure on both central banks to ease to get some stimulus via a weaker currency. We expect a 25bp BoC move on 21 October, versus current pricing of 15bp, and will be watching comments from Deputy Governor Schembri on Tuesday for any hints of a move as early as the September 9 meeting.
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