The CAD is more vulnerable than the NOK to a stronger USD environment, whether it be triggered by Fed tightening; or, global risk-off events like changes in China’s FX policy. The CAD’s (relative) Achilles heel compared with the NOK, is its large narrow basic balance deficit running at near cycle record levels of 4.5% of GDP. This compares with a Norwegian equivalent narrow basic balance surplus of 2% of GDP. Canada is particularly vulnerable to monetary policy divergences with the Fed because i) its C/A deficit is predominantly financed by debt related flows; and ii) these bonds are regarded as relatively close ... (full story)