Analysts at Scotiabank explained that the CAD is weak, down from Monday’s close and extending its recent decline to fresh multi-month lows, a relative performer among the G10 in an environment of risk aversion and broad-based USD strength.

Key Quotes:

"The market tone is dominating, pressuring CAD as a result of its risk profile as a growth-sensitive commodity currency."

"Oil prices are falling and Canada’s terms of trade are deteriorating. Short-term domestic rate expectations continue to soften and OIS are now pricing in just 5bpts of tightening for May 30, 16bpts for July, while still pricing in one full 25bpt hike by September."

"Measures of sentiment remain remarkably steady however, as risk reversals are already pricing a sizeable premium for protection against near-term CAD weakness."

"Our FV estimate for USD/CAD, using oil prices and the 5Y spread, is now just below 1.2600."