USD/CAD: A semi-hawkish BoC should limit loonie’s losses – Danske Bank

The USD/CAD is biased to the uspide, amid USD strength and headwinds from a turn in the industrial cycle, explained analysts from Danske Bank. They forecast USD/CAD at 1.26 in one-month and at 1.29 in six months. 

Key Quotes: 

“In line with other commodity and reflation sensitive currencies the CAD has suffered a setback this summer - although part of its losses have been erased in recent weeks. Fundamentally, we still consider CAD to be a more USD-dependent and less reflation sensitive version of NOK. Like Norges Bank, Bank of Canada (BoC) is also one of the G10 central banks guiding towards a normalisation of monetary policy in the coming years.”

“We still expect the cross to move higher over the coming 12M on broad USD strength and headwinds from a turn in the industrial cycle. On balance, the CAD’s USD-connection alongside a semi-hawkish BoC should limit the CAD’s losses. We forecast USD/CAD at 1.26 in 1M (from 1.25), 1.26 in 3M (unchanged), 1.29 in 6M (unchanged) and 1.29 in 12M (from 1.31).”