We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment George reviews the latest changes made to his Canadian Dollar forecast.
The Fed pivot in December, which braced the market for upcoming rate cuts, shifted their profile lower with USDCAD expected to peak at 1.3600 in Q2 of this year. The decline should continue towards the end of the year with the pace slowing next year, ending 2025 at 1.2900. Growth is expected to slow in Q1 with a recovery later this year and next as the Bank of Canada starts to cut rates. Volatility is expected the first half of this year as the market prices in the timing of the first interest rate cut and the number of cuts to follow. The primary risk to the forecast will be the timing and sequencing of rate cuts with RBC Economics expecting 100 bps of cuts this year from the BoC and 125 bps expected from the FOMC.
Broad-based USD direction remains the key driver of CAD, followed closely by equity markets. The expected trading range for this month is slightly higher at 1.3300 to 1.3800 with USD sellers looking towards the 1.3600/1.3700 area while USD buyers should see more advantageous opportunities during the second half of this year.