Analysts at Danske Bank see the USD/CAD pair trading at 1.38 over the next one to three months. They see the global environment as more important for CAD rather than Bank of Canada (BoC) actions.
Key Quotes:
“Since the last update, the positive risk scenario for our USD/CAD profile has first played out and since come to an abrupt halt on Fed and worsening COVID-19 figures. In the short-term, the global environment – and by extension commodity prices – will be crucial for the downside potential. Overall, we still believe in downside for the cross primarily founded in our baseline expectations for the global economy and the prospect of rising Canadian terms-of-trade.”
“The Bank of Canada has cut its benchmark rate forcefully to 0.25%, which the central bank now deems the “effective lower bound”. The BoC has also launched lending operations and asset purchase programs in government, provincial-and corporate bonds. For CAD, however, we deem the global environment more important for now.”
“We forecast USD/CAD at 1.38 in 1M (from 1.40), 1.38 in 3M (unchanged), 1.37 in 6M (unchanged) and 1.35 in 12M (unchanged).”
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