USD/CAD: Further moderate Loonie recovery potential in the medium term – Commerzbank

Until mid-May, the CAD found it difficult to stand its ground against the USD. Recently, however, it has been able to make up some lost ground. Economists at Commerzbank share their USD/CAD forecast.

BoC ended interest rate pause

The Bank of Canada surprisingly ended its interest rate pause at the beginning of June and raised the key interest rate to 4.75%. Further steps are expected. 

We see further limited CAD recovery potential against the USD due to the robust economy and a hawkish BoC. CAD should benefit if the interest rate differential between the Fed and the BoC narrows or turns positive in the medium term. 

EUR/CAD should reflect the interim EUR strength we expect.

Source: Commerzbank Research