Shorting CAD/NOK Best Way to Trade Wildfire Negativity: Credit Suisse

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Canadian dollar a sell against the Krone

The Alberta wildfires are one reason to bet the Canadian dollar will fall against the Norwegian Krone argue Credit Suisse who write:

Oil prices juggle two headlines this morning; the near-term focus seems to be more on Canadian wildfires whereas the medium-term development is the Saudi oil minister change (which most oil analysts including our own see supporting the idea that Saudi production is unlikely to be cut in June).

In FX we expect wildfires to be more negative for CAD compared to other oil currencies such as NOK.

Moreover NOK is also likely to be supported this week due to economic factors;

(1) Norges Bank should stay on hold and is unlikely to signal any urgency to cut, and

(2) our expectation for better inflation and GDP data this week. For further information please also see our weekly calendar here.

The risk of the trade could stem from a possible spread developing between Brent and WTI oil prices.