Despite the recent correction, the loonie should still perform well according to economists at ING. The loonie could retest its cycle highs against the dollar later this year.
Key statements:
“The loonie has been caught in the crossfire of unstable risk appetite and stalemate in the Organization of the Petroleum Exporting Countries and allies negotiations, but still has a strong set of fundamentals (as evidenced by the latest data of employment) “.
“The worst of the data flow affected by the spring outbreak of COVID-19 cases in Canada is likely to be behind us and the rapid rollout of vaccination is offering hope for a robust data summer.”
“The Bank of Canada will again reduce asset purchases in the third quarter, keeping the policy message firmly on the hawkish side. The main risks to the loonie are related to a slowdown in the US recovery or a sharp drop in prices. oil. None of these is our base case, and we still expect levels below 1.20 in USD / CAD in the fourth quarter of 2021. “
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