CAD could appreciate to 1.30 vs. USD in medium term – Danske Bank

Kristoffer Lomholt, Senior Analyst at Danske Bank, suggested there is the likeliness of CAD to appreciate towards the 1.3000 region vs. its neighbour on a 6-month view.

Key Quotes

“Economically, Canada remains heavily dependent on the US economy. In 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”.

“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 (from 1.28) and 1.28 in 12M (1.25)”.

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