CAD/ZAR Outlook:
Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows, with mixed signals affecting its direction.
Key drivers:
- Rate gap: The Bank of Canada is maintaining cautious monetary policy, while the South African Reserve Bank keeps high interest rates to combat inflation, benefiting the ZAR.
- Risk/commodities: With oil prices significantly above their recent average, the CAD may face upside potential if this trend continues, though it's not strong enough to lift it above recent lows.
- Macro factor: Strong global demand for South African commodities, including gold and platinum, enhances the ZAR's appeal, though this is offset by broader market dynamics.
Range:
The CAD/ZAR is likely to drift within the recent range, potentially testing its lower extremes as the market reacts to fluctuating commodity prices.
What could change it:
- Upside risk: A sustained rise in oil prices could bolster the CAD significantly.
- Downside risk: Any resurgence in U.S.-Canada trade tensions could further pressure the CAD lower.
