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Recessions at home and abroad are historically negatives for a cyclical currency like the Canadian dollar, as analysts at CBIC Capital Markets note.

Key quotes

“BoC rate cuts are fully priced-in, and the market is already assuming a recession in Canada, weakness in oil, and further news pointing to increases of Covid-19 in North America.”

“By June, while we’re likely to see spikes of weakness for the C$ in the interim, there could at least be some evidence of a cresting caseload, and perhaps a bottoming in oil, leaving dollar-Canada relatively flat to today’s levels at 1.45, with a postrecession recovery to 1.40 by year-end.” 

“A continued trade and current account deficit in 2021 should push CAD back through 1.41.”