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The Canadian dollar suffered from bad economic news and lost some ground. What’s next?

Here is their view, courtesy of eFXdata:

CIBC Research discusses USD/CAD outlook and  adopts a structural bullish bias targeting the cross at 1.30 by end of Q2 and at 132 by end of Q3.

What happened to the petro-loonie?  Crude oil’s climb just hasn’t done much for the Canadian dollar. In part that reflects concerns that pipeline capacity issues and regulatory processes will hold back the potential positives for energy sector capital spending in Canada, as well as the lighter touch on environmental and corporate tax policies being seen in Washington.

Although exports picked up late in Q1, a record monthly goods trade deficit reminded loonie-watchers that current trade-related FX flows are a burden on the Canadian currency.

But with the economy see-sawing above and below the 2% growth mark, the six-month pause since January looks indicative of what lies ahead. That will have Canadian short rates rising at roughly half the US pace, key to our call for a dollar-Canada climb to 1.32 in upcoming months,” CIBC argues.

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