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Key Takeaways:
- 💵 Limited relief rally predicted for Canadian dollar
- 📉 Canadian dollar expected to remain under pressure
- 🌎 Global economic concerns impacting currency markets
- 🇨🇦 Bank of Canada may need to cut rates further to support economy
- 💰 Emerging-market stocks and currencies rallied
- 📈 Developing-world stocks climbed the most since September
- 🌍 Greenback plunged
- 🤝 Trump postponed trade levies on Canada and Mexico
- 🇨🇳 China had a measured response to the 10% tariff
- 📉 BofA expects the Canadian dollar’s relief rally to be short-lived
- 💰 USD/CAD predicted to be above 1.45 in the near term
- 🛡️ Tariff threats likely to persist until a new USMCA deal is negotiated
- 📉 Canadian dollar worst-performing G10 currency in trade-weighted terms
- 🌎 Risk-off sentiment a bigger driver of USD/CAD moves than interest rate differentials
- 📈 Bank maintains a long-term USD/CAD target of 1.35
Global Economic Concerns Impact Currency Markets
- The Canadian dollar is predicted to remain under pressure due to global economic concerns impacting currency markets.
- The Bank of Canada may need to cut rates further to support the economy amidst these challenges.
- Trump’s decision to postpone trade levies on Canada and Mexico has provided some relief but limited rally is expected for the Canadian dollar.
- China responded in a measured way to the 10% tariff, indicating a cautious stance in the midst of ongoing trade tensions.
Emerging Markets and USMCA Deal Impact
- Emerging-market stocks and currencies rallied, with developing-world stocks seeing their biggest climb since September.
- The Greenback plunged as risk-off sentiment played a significant role in currency movements.
- It is predicted that tariff threats will continue until a new USMCA deal is negotiated, impacting the performance of the Canadian dollar.
- Bank of America expects any relief rally for the Canadian dollar to be short-lived, with the USD/CAD rate predicted to be above 1.45 in the near term.
- Despite short-term fluctuations, the Bank maintains a long-term USD/CAD target of 1.35.