Morgan Stanley likes USDCAD and GBPCAD higher

USD/CAD

• Could see significant upward movement, particularly in a risk-off market.
• As the Fed and BoC policies diverge, with the Fed potentially being less dovish than the BoC, the USD/CAD pair is likely to benefit.
• Investors might not currently be pricing in this divergence fully, providing scope for a significant rise in USD/CAD, especially above the 1.40 mark in risk-off scenarios.

GBPCAD

• Long GBP/CAD positions are recommended due to expected policy divergence between the BoC and the Bank of England (BoE).
• The BoC is expected to cut rates more aggressively than the BoE. This divergence supports a bullish view on GBP/CAD.
• The potential for CAD to become a funding currency further supports the attractiveness of GBP/CAD longs, particularly if UK inflation remains sticky, limiting the scope for BoE rate cuts.

This article was written by Arno V Venter at www.forexlive.com.