USD/CAD likely to move toward 1.25 by year-end - Lloyds

Analysts from Lloyds Bank expect the USD/CAD pair to move lower over the next month and to finish 2016 around 1.25.

Key Quotes:

“USD/CAD has ended the past month little changed, around 1.30, although this disguises significant intra-month volatility, with the currency pair hitting a low below 1.25 in early May.”

“The CAD appreciation was primarily driven by a firming in oil prices and a resilient Canadian economic outlook.”

“However, Governor Polozwas careful to note that the appreciation of the CAD – the currency has strengthened by 12% since mid-January – posed a threat to non-resource exports. Growth in these exports is important in ensuring economic stability.”

“Although these comments suggest the BoC is mindful of further currency appreciation if, as we expect, oil prices continue to rise, USD/CAD is likely to move lower, towards 1.25 by year-end.”