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Analysts at CIBC, explained that the loonie rallied significantly post trade agreement. They see USD/CAD moving back to the low 1.30’s during the third quarter 2019.  

Key Quotes:  

“Some investors with long C$ positions may have been slightly disappointed by the extent of the loonie’s posttrade agreement rally. Although the drop in USDCAD to 1.28 was broadly in line with our forecast, much of that has now being unwound.”

“The Canadian dollar’s performance does, however, look more impressive on other crosses, hitting its highest level in more than a year against a basket of other currencies. As we’ve shown before, that could be a factor restricting further loonie appreciation.”

“While trade with the US is key, Canadian companies have to compete against other global firms for market share. And a growing deficit with Europe has been important in Canada’s continued current account shortfall. So while the Canadian dollar will likely hold these levels through Q1 2019, we expect it to then weaken and USD/CAD to rise back to the low 1.30’s.”