Strong loonie could test 1.35 – ING

ING’s Francesco Pesole points out the Canadian Dollar is the best-performing G10 currency since the conflict started, supported by resilient equities and Canada’s energy exporter status. While markets now price a Bank of Canada hike by year-end, ING is cautious on Canada’s outlook but sees further easing as unlikely and expects USD/CAD pressure toward a break below 1.35 if Oil unwinds gradually.

Energy support and BoC pricing aid CAD

“The Canadian dollar has been the best-performing G10 currency since the start of the conflict.

“…the equity market holding up relatively well remains very crucial as it allows the loonie (like AUD) to fully benefit from its energy net-exporter status without suffering from major risk sentiment fallout.”

“Domestically, markets have also priced in a rate hike by the Bank of Canada by year-end. We aren’t convinced just yet and remain cautious about Canada’s economic outlook due to upcoming USMCA renegotiations. However, further easing now seems off the table.”

“Should we see a somewhat gradual unwinding of the oil rally with risk sentiment recovering further, USD/CAD may stay under some pressure and break below the 1.35, late-January lows.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)