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The Canadian dollar was the best-performing major currency in the first quarter. Stronger-than-expected GDP growth, high commodity prices and an ebullient housing market supported by record employment in high-paying industries set the stage for more QE tapering by the Bank of Canada as early as this month. Economists at the National Bank of Canada remain comfortable with the target of 1.20 for the USD/CAD pair in the second half of this year.

Bank of Canada: Slow the pace, extend the term  

“We see little downside for commodity prices in coming months given the current backdrop and an accelerating vaccine rollout.”

“The prime minister expects that by July 1 Canada will have received about 44 million doses, not counting Johnson & Johnson vaccines set to arrive in April. Barring some extraordinary disruption, all 31 million Canadians above the age of 16 could be vaccinated by the end of June and many will have received a second dose.”

“The long-awaited federal budget set for April 19 is expected to be very supportive of households and is likely to help formalize program spending. While it will not necessarily affect the Canadian dollar much, new or front-loaded spending could have some effect.”  

“The Bank of Canada’s Monetary Policy Report is set to be released April 21. We expect the BoC to announce further slowing of asset purchases. Though market participants have probably priced in this tapering, its formalization could lead to some swings. Overall, we expect tapering to add to the strength to the CAD.”