USD/CAD: Easing of tensions in Ukraine to help the loonie – NBF

The Canadian dollar has held up relatively well against the US dollar and most other currencies since the start of Russia's invasion of Ukraine. What could be the driving force behind a significant appreciation of the CAD? Economists at the National Bank of Canada take a look at the possible scenarios which would be positive for the loonie.

The upcoming federal budget could be positive for the loonie

“According to our model, the CAD remains significantly undervalued against the USD.”

“What could be the driving force behind a significant appreciation of the loonie? The easing of tensions in Ukraine would certainly help. A drop in commodity prices would follow, but the improved outlook for global economic growth would encourage investors to reduce their exposure to the USD.”

“The upcoming federal budget could be positive for CAD if Ottawa unveils an ambitious tax credit program to encourage carbon capture, utilization and storage (CCS/CCUS).”