USD/CAD has pushed higher to start the year. Economists at the National Bank of Canada analyze Loonie’s outlook

Rate cuts by the BoC are likely to arrive before the Fed

The Canadian Dollar (CAD) has been under pressure from a combination of a stronger USD, a slowing economy and rising expectations for an easing in monetary policy. Oil prices have also failed to significantly rise despite renewed geopolitical pressure on the global stage. 

Looking ahead, rate cuts by the Bank of Canada are likely to arrive before the Fed and exacerbate the yield differential with the US. Combined with a risk-off appreciation of the USD, we expect USD/CAD could reach 1.4500 by the midpoint of this year only to recover slightly by year-end.