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USD/CAD could drop to 1.28 but Canadian economy expected to weaken – CIBC

Analysts at CIBC, point out that the Surprise Index has been clearly positive for Canada but it has not been reflected on the USD/CAD pair. They consider the pair could fall to 1.28 in the coming months. 

Key Quotes: 

“While strengthening recently, the C$ hasn’t responded as much as many people would have expected to the historically high level of the Canadian data surprise index. But that doesn’t mean a further rapid appreciation is in order.”

“The surprise index puts a large weight on headline employment and the unemployment rate. But as we showed last week, the quality of those job gains means the apparently tight labour market hasn’t translated into particularly strong consumer spending or GDP growth. Indeed, 2019 GDP estimates for Canada have actually fallen further below those for the US even with the “positive” data surprises.”

“While USDCAD could fall to 1.28 in the coming months, we expect a slowing Canadian economy to see it weaken again through 2020.”

 

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