USD/CAD will see a return back to a 1.25-1.30 trading range during the back end of this year – SocGen

Economists at Société Générale analyze CAD outlook and expect the USD/CAD pair to tick down below the 1.30 level.

Slow gains as Fed turn approaches 

The peak level of US-Canadian relative rates is now probably in the rear-view mirror for the rest of the current economic cycle, and that should support the CAD from now on. 

We’re unlikely to see a rapid move from here given that there is a possibility that the Fed tightens a little more (the Bank of Canada seems very likely to raise rates at least one more time), but we think we have seen the peak in USD/CAD and will see a return back to a 1.25-1.30 trading range during the back end of this year. 

There is uncertainty about the impact on the Canadian economy of this spring/summer’s wildfires, and success in getting inflation down in Canada will translate into reduced urgency about further policy tightening, but that means the pace and extent of the downtrend in USD/CAD is likely to be slow rather than suggesting levels below USD/CAD 1.30 can’t be sustained.