On Wednesday, Macquarie analysts gave insight into the potential future movements of the Canadian Dollar (CAD) compared to the US Dollar (USD).
They indicated that it is unlikely that the fear of harsh American import rates will materialize immediately after the inauguration, which indicates that the Rally of the USD compared to the EUR, CAD and other currency may not go beyond the first quarter of the year.
The analysts emphasized that, despite the initial threats with rates, Canada is expected to grow even closer to the United States in the coming years. This projection is based on various factors, including the domestic policy of Canada, foreign policy, border and immigration policy, as well as the trade and capital account flows, all of which show that the interests of the US agree. It is expected that the expected redegmenting on the agreement between the United States, Mexico and Canada (USMCA) will further strengthen this relationship.
According to Macquarie, this closer relationship between Canada and the US will in the future lead to a much more stable exchange rate. They predict that as a result of these developments, the USD/CAD purple will experience a downward trend and possibly reach a halfway goal of 1.35.
The stability of the USD/CAD exchange rate is seen as a reflection of the ‘merger trend’ context, in which the two economies continue to integrate and are aligned, which leads to fewer exchange rate fluctuations. The analysis of Macquaria predicts a quieter period for the currency pair, which was historically influenced by trade policy and geopolitical factors.
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