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Ahead of today’s Bank of Canada meeting, economists at Credit Suisse retain a constructive near-term bias on the loonie and hold a 1.2750-1.2780 target range for USD/CAD. A uniquely strong national vaccine procurement outlook and hopes of US fiscal stimulus are new supportive developments for the Canadian dollar.

Key quotes

“Our bias is to view the improvements on the medical outlook front as more relevant from a risk management standpoint, especially as markets are likely to view the recent increase in fiscal spending introduced on November 30 by the Trudeau administration as partially offsetting the likely negative growth impact of renewed lockdown measures. This leaves us looking for no major change in the BoC key policy measures and in forward guidance.”

“The latest COVID-19 vaccine procurements data shows Canada as having booked the single largest amount of vaccine dose on a population scaled basis in the world. This dictates higher national resilience to vaccine rollout and distribution issues that might emerge in the coming weeks.” 

“While the outcome of negotiations in US Congress on a possible stimulus bill remains uncertain, the tone of the dialogue appears to have improved over the past week, with more evidence of compromise in the pipeline. CAD, due to its gearing to US growth and to its pro-cyclical traits, stands as more likely to benefit than other pro-cyclical currencies from further constructive developments on this front.”