CIBC Research discusses CAD outlook in 2019 and adopts a bearish bias against the EUR and GBP.
“Examining where wage inflation is perking up could be key in determining monetary policy and FX moves in 2019. Interestingly, data last week showed that the most commonly watched measure of wages in the UK is as close to pre-crisis levels as average hourly earnings are in the US. That suggests that if (and admittedly it’s a big if at the moment) Brexit uncertainty fades the BoE could hike a couple of times in 2019 and sterling could see a big gain.
In contrast, tepid wage growth in Canada suggests that there’s little need for a lot of BoC hikes even after the expected temporary slowdown in GDP growth (driven by oil production cuts) is over. That would see CAD underperform versus EUR and GBP in 2019,” CIBC argues.