USD/CAD to rise back to 1.45 by mid-year – CIBC

Analysts at CIBC, forecast the USD/CAD pair at 1.45 by the second quarter of 2020 and at 1.40 by year-end. They see modest strengthening of the loonie over the next years.

Key Quotes: 

“The shift to a risk-on environment saw the greenback give back some ground, and thus the C$ strengthen relative to the levels seen in mid-March. But we’re still wary of the rally in equities, since, barring the availability of a massproduced wonder drug that allows a quick end to the pandemic, the long path to restore activity to where we were in February implies a large hit to both 2020 and 2021 earnings.

“While that disappointment might not produce much of a general flight to the USD, with global oil prices having gone negative and still sitting at weak levels, despite a deal being reached to cut production and prop up prices, we expect the Canadian dollar to return to its recent trough, with dollar-Canada at 1.45 by mid-year.”

“Longer-term, while we look for see modest strengthening in the loonie next year as the market looks ahead to better levels of global activity in 2022, assuming that we are seeing progress towards a vaccine, we still anticipate the need for a weaker C$ further out. That key ingredient will be necessary to see the rotation away from consumption and housing and towards exports, which should see USD/CAD push higher to 1.41 by the end of 2021."