Strategists at TD Securities analyze Russia/Ukraine implications for Canada. For the loonie, it is all about risk, oil, and rates in the weeks ahead.

BoC needs to stay the course

“Higher commodity prices (should they materialize) will be a boon for producers and provinces with large energy sectors, but will also add to inflationary pressures facing consumers (particularly food and gasoline prices). Consequently, we do not think the invasion of Ukraine will alter the BoC’s tightening path.”

“The USD and broader global risk assets are trading with a chunky premium, suggesting geopolitical stress could ebb in the weeks ahead. That would offer a nice runway for CAD, reflecting the positive tailwinds of improving sentiment, BoC lift-off, and positive terms of trade.”

“We eye a retest of 1.2450 in USD/CAD towards late Q1/early Q2.”

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