News & analysis

After remaining relatively range-bound for most of 2023, deteriorating risk appetite and growing geopolitical risks have led the Canadian dollar to depreciate towards its year-to-date lows. Due to offsetting cross-currents and a shifting market environment, we now expect the loonie to remain weak over the near term, and have turned neutral on USDCAD over a 3 month horizon. Over the medium term, however, a growing number of signals suggest the Canadian economy will enter a recession in 2024, which would see the Bank of Canada cut rates earlier and more aggressively than market pricing currently implies. With markets viewing the BoC as more hawkish than the Fed, we believe there is considerable scope for interest rate differentials to widen as recessionary conditions become increasingly evident in the data. Under our base case, USDCAD could intermittently break through 1.40 as early as 2024 Q1.

You can read the CAD Outlook in full here:

DOWNLOAD THE FULL REPORT

 

Authors: 

Simon Harvey, Head of FX Analysis

Jay Zhao-Murray, FX Market Analyst

 

Disclaimer
This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.