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- USD/CAD: Rangebound until latter part of 2021 - CIBC
USD/CAD: Rangebound until latter part of 2021 - CIBC
FXStreet notes that the loonie continues to be pushed and pulled by currencies moving versus the USD, leaving the CAD stronger against the greenback over the past month. According to economists at CIBC, the USD/CAD pair is likely rangebound until it becomes clear that the Bank of Canada (BoC) will lag the Fed on hikes.
“A generally range-bound US dollar in the next couple of quarters will remove one impetus for loonie appreciation. Both Canada and the US will be dealing with second waves of COVID-19, but there are now some questions emerging on whether Canada will have a longer wait for mass vaccination, given its lack of domestic vaccine manufacturing capacity. If the vaccine timeline in Canada lags materially behind its peers, that could compound C$ weakness.”
“Over the medium-term, we look for the loonie to soften, once trade fundamentals are no longer being offset, as they are today, by overnight rates above the US dollar and other majors.”
“Note that markets have been assuming that the BoC will lead the way on rate hikes, which runs counter to the fact that Canada’s GDP will have suffered a larger drop in 2020. As the BoC signals it can be very patient, we look for USD/CAD to end 2021 at 1.36.”
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