USD/CAD: Loonie to remain supported and regain some ground medium-term – Commerzbank

The Canadian dollar has come under pressure, even though the Bank of Canada (BoC) Governor signaled further big rate steps. However, economists at Commerzbank expect the loonie to recoup some ground in the medium-term.

Further short-term spikes cannot be excluded in case of rising risk-off sentiment 

“The governor of the BoC, Tiff Macklem, signaled that central bankers were likely to consider a further hike to the key rate by 50bp at the next monetary policy meeting in early June. At the same time, he limits emerging expectations of an even bigger rate step by adding that anything bigger than a half-percentage point would be unusual.”

“Further short-term spikes cannot be excluded in case of rising risk-off sentiment on the market. The development of the pandemic is the main risk in addition to the war in Ukraine. However, we assume that the loonie will remain supported and will be able to regain some ground medium-term. The comparatively robust economy and the BoC’s active monetary policy point that way.”