USD/CAD forecast to move lower over next quarters, but less than previously estimated - Danske Bank

According to analysts from Danske Bank, the Canadian dollar will likely appreciate over a 12 month period versus the US Dollar but not as much as previously forecast. 

Key Quotes: 

“The higher persistency of USD strength than we previously pencilled in marks a headwind for oil, global risk appetite and hence the CAD. Both headline and core inflation in Canada is trading just above 2%. However, inflation expectations have moved sharply lower recently, trading close to the 2016 low. With this in mind, the Fed cutting rates and the escalation in the trade war, we now pencil in two 25bp rate cuts from Bank of Canada over the coming 12M.”

“Fundamentally, we still regard USD/CAD as overvalued with fair-value estimates in the low 1.20s. We forecast USD/CAD at 1.32 in 1M (from 1.30), 1.30 in 3M (1.28), 1.29 in 6M (1.27) and 1.27 in 12M (1.25).”