Danske Research adopts a bearish USD/CAD bias over the medium-term, expecting the pair to drop towards 1.38 in 3-months.
"USD/CAD has been fluctuating around the 1.40 level as the impact of higher oil has been offset by USD strength," Danske notes.
"Looking ahead, we still pencil in a lower cross as the reopening of the global economy contributes to stabilising commodity imbalances. That said, Canadian oil is notorious for having high B/E costs, meaning Canadian producers will be among the first to take the supply adjustment. This in turn should prove a persistent headwind to growth,"
Bank of Canada has cut its benchmark rate forcefully to 0.25%, which the central bank now deems the “effective lower bound”. BoC has also launched lending operations and asset purchase programs in government, provincial and corporate bonds. COVID-19 figures have shown clear improvement and look better than the US," Danske adds.