USD/CAD could slip towards 1.25 in 12-month – Danske Bank

Analyst at Danske Bank Kristoffer Lomholt sees the pair depreciating to the 1.2500 area within a year’s time.

Key Quotes

“As widely expected, the Bank of Canada kept the policy rate unchanged at 0.5% at the July meeting, referring to the continued ‘structural adjustment to the oil price shock’. Markets currently assign a 40% probability of an additional 25bp rate cut in 12M. We maintain the call that the Bank of Canada will leave rates unchanged over the coming year”

“We still expect the fundamentally undervalued ‘loonie’ to appreciate gradually over the coming year on the back of valuation, a gradually higher oil price, markets repricing Bank of Canada monetary policy and a generally improved growth outlook in North America”.

“In light of the reduced outlook for USD strength, we lower our USD/CAD forecast to 1.30 in 1M (from 1.33), 1.29 in 3M (1.31), 1.27 in 6M (1.28) and 1.25 in 12M (unchanged)”.