The Canadian Dollar (CAD) has eased back somewhat in the early part of the new year after rallying significantly into the end of 2023. Economists at Scotiabank analyze Loonie’s outlook.
CAD expected to rebound in Q2/Q3
Headwinds for the CAD remain in the form of negative spreads versus the USD and soft commodity prices at present.
Near-term, CAD losses may extend a little further but the 1.3500/1.3600 zone may offer some (technical) value for the CAD.
Seasonality turns CAD-positive in Q2/ Q3, lower rates globally in the months ahead will be positive for risk appetite (and, by extension, for the CAD).
We expect the Fed to cut rates more aggressively than the BoC through 2025 which should result in a CAD-supportive compression in term yield spreads in the months ahead.
USD/CAD – Q1-24 1.3300 Q2-24 1.3300 Q3-24 1.2800 Q4-24 1.2800
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- Source: https://www.fxstreet.com/news/usd-cad-to-drop-towards-12800-by-year-end-scotiabank-202402151504
