USD/CAD: Greater risk of further near-term declines with the momentum against the USD – MUFG

Economists at MUFG Bank analyze CAD outlook ahead of the Canada CPI data for June.

The BoC is being overly optimistic

While some economic data has shown resilience, we suspect the BoC is being overly optimistic and see risks skewed to the data coming in weaker than expected, which should limit the scope for CAD to outperform other G10 currencies as the US Dollar weakens further. 

For now, with the momentum against the US Dollar there seems a greater risk of further near-term declines in USD/CAD. 

Perhaps just as important as the CPI print is whether the increased expectations of a soft landing can persist. That expectation is equity market supportive and is a positive backdrop for CAD for now. 

See – Canada CPI Preview: Forecasts from five major banks, better inflation, but not yet good enough