According to Krishen Rangasamy, analyst at National Bank Financial, oil is reasserting itself as the main driver of the Canadian currency which is likely to push the USDCAD towards the 1.30 level by the end of first quarter.
Key Quotes
“While the case for further monetary policy tightening by the Bank of Canada has become weaker amid a larger-than-expected output gap, slowing credit growth, and enhanced uncertainties with regards to the global economy, that’s not to say the Canadian dollar will repeat last year’s disastrous performance (when it lost 8% versus USD).”
“The influence of Canada-U.S. interest rate spreads on the loonie seems to be waning, in sharp contrast with oil which is reasserting itself as the main driver of the Canadian currency. Thanks in part to supply cuts both at home and abroad and the U.S. dollar’s weakness, oil prices are now rising as we had expected and pushing USDCAD towards our end-of-Q1 target of 1.30.”
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