Loonies continue to struggle to stay grounded. Commerzbank economists see limited potential for CAD recovery in the medium term.
The CAD is likely to have a hard time against the EUR at the moment
“Given the robust economy and active BoC, we see further limited recovery potential for the CAD against the USD in the medium term, supported by weakening USD strength. The interest rate differential could temporarily narrow somewhat Fed is cutting its key rate from late 2023, as we expect, and the BoC is not following suit (to the same extent).
“The CAD is likely to struggle at the moment against the EUR, which has gained in attractiveness, for example due to pricing in the wake of the energy crisis and rising expectations of interest rate hikes. However, rising interest rates in the eurozone should increasingly be reflected in weaker ones economic indicators there too. This should limit the CAD’s losses against the EUR.”
“In the medium term, the Loonie should recover if the EUR is weaker in 2024 as we expect.”