CIBC FX Strategy Research argues that while CAD strength could extend towards a temporarily closing in on 1.25, it will also be a key factor in sending the BoC to the sidelines, letting a Fed hike in December re-widen interest margins in favor of the USD.
"In the past, the BoC has signaled that the 1.25 level on USD/CAD represents a headwind to export growth. With home-building set to slow in the face of rate hikes and mortgage regulatory changes, the Bank is counting on exports as a source of growth in 2018
A six-month gap to the next rate hike after October should see the CAD pull back, even if oil regains some of its recent lost ground," CIBC argues.
CIBC targets USD/CAD at 1.28 in Q3, and at 1.30 by year-end.
Source: CIBC Economics – CIBC Capital MarketsOriginal Article
