Hopes rest on further USD weakness for the time being – Commerzbank
|The Canadian Dollar (CAD) has performed poorly once again this year. Only the Japanese yen and the New Zealand Dollar (NZD) have appreciated less against the US Dollar (USD) than the CAD after a period of weakness in recent months, Commerzbank's FX analyst Michael Pfister notes.
CAD is likely to strengthen against a weak USD
"The reasons for this are clear: the Canadian real economy is suffering greatly from US tariffs, prompting the central bank to cut interest rates further. However, the CAD is also indirectly affected by the tariffs. If the US economy weakens, Canada will suffer too, due to the close links between the two countries' economies. In short, Canada is being hit twice as hard as other countries."
"We expect this to continue in the coming year. Although we expect the Canadian real economy to stabilize, this will likely be at a weak level. Plus, while the labor market will have to cope with a lower labor supply, it is still likely to be affected by the poor outlook. There is a clear risk that this situation will persist until a deal can be reached with the US."
"Nevertheless, we expect lower USD/CAD levels. This is mainly due to our expectation of a weaker USD, given the attacks on the Fed's independence and the significant interest rate cuts that our economists expect. Basically, we expect this year's trend to continue. The CAD is likely to strengthen against a weak USD, but will probably continue to struggle against other currencies."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.