HSBC still expects USD/CAD to climb, but the bank thinks the pair’s advance will slow after a strong rally. The exchange rate sits near multi-year highs around 1.4200, and wider US-Canada interest-rate differentials remain supportive for the pair.
HSBC expects the US Dollar to Canadian Dollar exchange rate to keep rising, though it forecasts a gentler climb after the pair’s strong run since early May. USD/CAD remains close to multi-year highs, trading around 1.4200 after rallying almost 3% during June.
The bank notes that the Canadian Dollar has been one of the weakest G10 currencies over the past month, with only Sterling posting a weaker performance against the US Dollar. HSBC expects the move higher to continue but at a much slower pace: “we expect the move higher in USD/CAD to continue but at a much slower pace”, reflecting how much of the recent repricing has already happened.
Wider US-Canada interest-rate differentials remain supportive for the pair, HSBC argues, after the Federal Reserve adopted a more hawkish tone while the Bank of Canada reiterated a patient policy stance. The bank also sees the Canadian Dollar as still relatively expensive against the broader US Dollar, limiting its room for a sustained recovery.
With much of the interest-rate adjustment already priced in, HSBC points to a slower grind higher rather than another sharp rally. The bank remains constructive on USD/CAD but expects gains to become more measured as the pair consolidates near current levels.
Source: Exchange Rates UK
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