USD/CAD to fall to 1.26 by end-2017 – Lloyds Bank

Analysts at Lloyds Bank forecast USD/CAD to fall to 1.26 by end-2017 by taking in account the latest developments on the Canadian economy’s macro front.

Key Quotes

“The Canadian dollar has spent the last month consolidating in its 1.30 to 1.35 medium-term range. At times, the currency pair has ebbed and flowed with the broader US dollar and oil prices. Following March’s ‘dovish’ FOMC hike, USD/CAD dropped towards 1.3250. Yet this decline proved short-lived, with CAD selling-off as oil came under pressure and flirted with support around $50/barrel.”

“Domestic data continue to be strong, outperforming economists’ expectations to a degree not seen since mid-2010. Fourth-quarter GDP rose 2.6%y/y, inflation for February was at 2.0%y/y and the labour market remains firm. As expected, the Bank of Canada left interest rates unchanged at its April meeting. Following an upward revision to its GDP growth profile for 2017, BOC Governor Poloz struck a more upbeat tone, although he continued to warn of weakness in business investment and exports. We continue to see Canadian rates on hold through the remainder of this year. Moreover, the more conciliatory tone from the US administration towards its trading relationship with Canada, after Trump’s “wonderful” meeting with PM Trudeau, has reduced political and economic uncertainty. In light of all this, we forecast USD/CAD to fall to 1.26 by end-2017.”