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Analysts at NBF point out that they had expected USDCAD to move towards 1.20 this summer, but downside risks to the Canadian economy have increased amidst an apparent deterioration in the trade relationship with the U.S.

Key Quotes

“The Bank of Canada may now be more cautious in its approach to monetary policy normalisation. We have tweaked our near term Canadian dollar forecasts to reflect ongoing headwinds brought by U.S. protectionism, but are keeping unchanged our longer term projections which show a strengthening loonie on the assumption of an eventual deal on trade. As such, our new target range for USDCAD for the next 12 months is 1.25-1.35.”