USD/CAD: Loonie vulnerable to the external environment – Danske Bank

FXStreet Insights Team FXStreet

The Canadian Dollar has come under renewed pressure over the last month. Economists at Danske Bank analyze Loonie’s outlook.

BoC to keep policy rates unchanged until Q1 2024

The rise in short-end oil contracts has been driven by tight supply/geopolitical concerns which constitutes a negative supply shock to an already weakening global growth backdrop. In our view that leaves CAD vulnerable to the external environment incl. higher real rates despite the domestic economy recently performing better-than-expected.

We expect the Bank of Canada to keep policy rates unchanged until Q1 2024 when we pencil in the first rate cut.

A move lower in USD/CAD would likely require a stronger global growth backdrop than what we pencil in or a very ‘hard landing’ requiring a sharp easing of global monetary conditions, including a weaker USD.

Forecast: 1.37 (1M), 1.39 (3M), 1.40 (6M), 1.42 (12M)

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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