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Analysts at MUFG Bank forecast the USD/CAD will trade at 1.29 by the end of the fourth quarter and at 1.28 by the end of the first quarter of 2021. They see the rebound in oil prices encouraging a stronger Canadian dollar. 

Key Quotes:

“CAD has under-performed relative to many other G10 currencies – only the low-yielding, low beta currencies of EUR, JPY and CHF have performed worse than CAD. The fact that US-Canada trading relationship is resolved and not as unclear as say for other countries may explain some of this underperformance. Furthermore, COVID infections are accelerating in Canada and coupled with the near-term risks of COVID in the US, this is weighing on CAD performance.”

“The government has suggested Canada will be slower with vaccination roll-outs due to less manufacturing capacity.”

“The BoC’s aggressive monetary stance will persist meaning CAD recovery will be more subdued than other G10 global growth-sensitive currencies.”