Economists at Commerzbank maintain their outlook and see moderate CAD recovery potential in the medium term.
EUR/CAD to edge lower in the medium term
The CAD should benefit if, as we expect, the BoC keeps its key rate at a higher level for longer and cuts it less than the Fed. This would reduce the interest rate differential between the Fed and the BoC and it could turn positive in the medium term.
In the short term, EUR/CAD should reflect the fact that the ECB has ended its interest rate cycle, while the BoC could deliver another rate hike. In the medium term, however, the interim EUR strength we expect should be reflected. The key factor here is our economists’ expectation that the ECB will not cut interest rates, contrary to current market expectations – a hawkish signal from which the Euro should benefit.
Source: Commerzbank Research