USD/CAD: The risk of a spike is high – MUFG

The Canadian Dollar advanced in September which was notable given the broad US Dollar strength. Economists at MUFG Bank analyze Loonie’s outlook.

CAD resilience but downside risks persist before recovery takes hold

If US 10-year yields continue to drift higher the risk of an equity market correction will increase – if a correction unfolds, the risk of a spike in USD/CAD is high.

If the Fed hikes before year-end, the BoC could be in a position to limit the scale of increase in USD/CAD.

USD/CAD – Q4 2023 1.3600 Q1 2024 1.3400 Q2 2024 1.3300 Q3 2024 1.3200