USD/CAD: Loonie to run a downhill in the second half of the year – CIBC
12.04.2021, 08:40

USD/CAD: Loonie to run a downhill in the second half of the year – CIBC

FXStreet reports that economists at CIBC Capital Markets said that the Canadian dollar could hold on to Q1 gains into mid-year.

“The enthusiasm around crude prices that drove those gains has since been tempered as OPEC+ has announced that it will begin a partial rollback of supply cuts over the next three months. Combined with a USD that is now broadly back in favor with investors, CAD no longer looks set to appreciate, and will likely remain steady into mid-year.”

“While the Bank of Canada might nudge its earlier timetable for rate hikes up a bit, its messaging will look dovish relative to what’s now priced in, which would entail a hike in mid-2022. In contrast, both Fed talk and market expectations will be bringing forward the timetable for US rate hikes as the recovery progresses. A shift to a more hawkish tone from the Fed will pave the way for a weaker Canadian dollar in H2 and through 2022.”

“Look for USD/CAD to trade in the 1.30-1.34 range next year. That level will be more constructive for exports, as the experience of the last decade suggests that Canada isn’t competitive with a sub-1.30 dollar-Canada exchange rate.” 

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