USD/CAD: In the hands of oil and the US economy under Trump – Danske Bank

Kristoffer Kjær Lomholt, Senior Analyst at Danske Bank, suggests that economically, Canada remains heavily dependent on the US economy while on isolation, the improved growth outlook in the US and the outlook for a fiscal boost are positives, yet a possible renegotiation of the NAFTA is a source of uncertainty for Canadian exporters.

Key Quotes

“While the outlook for an OPEC deal, or rather no-deal, on 30 November is, in our view, priced into the oil price, the development in the USD will be important. We expect further USD-strength going into the Fed December meeting and as a result lift our USD/CAD profile to 1.36 in 1M (from 1.33) and 1.34 in 3M (1.31).”

“In the medium- to longer run, we still expect the fundamentally undervalued ‘loonie’ to appreciate on the back of valuation and a gradually higher oil price. We forecast the cross at 1.30 in 6M (from1.28) and 1.28 in 12M (1.25).”