USD/CAD to plummet below 1.20 as constructive loonie profile persists – ING

Despite the recent correction, the Canadian dollar should still do well. According to economists at ING, the CAD could retest its cycle highs against the dollar later this year.

USD/CAD to nosedive below 1.20 before year-end

“The loonie has been caught in the crossfire of unstable risk appetite and the impasse at the OPEC+, but is still counting on a solid set of fundamentals (as emerged from the latest jobs data).” 

“The worst of the data-flow affected by the spring flare-up in COVID-19 cases in Canada is likely past us, and the fast vaccination roll-out is offering hope for a summer of robust data.” 

“The Bank of Canada will taper asset purchases again in 3Q, keeping the policy message firmly on the hawkish side. The main risks for the loonie are related to a slowdown in the US recovery or a sharp drop in oil prices. Neither of these are our base case, and we still expect sub-1.20 levels in USD/CAD in 4Q21.”