Bank of Canada will need to cut interest rates – USD/CAD to jump above 1.40

Analysts at National Bank of Canada are expecting a weak Canadian dollar ahead, citing:

• underwhelming economic data (due to interest rates being too restrictive), in particular, weak private domestic demand that “contracted for the second quarter in a row and has now fallen four times in six quarters”
• private-sector employment has been flat since June 2023
• inflation is already within the Bank of Canada’s 1-3% target range

Putting these together NBC says the BoC needs to cut interest rates:

• restrictive monetary policy in Canada can no longer be justified
• we continue to believe that rate cuts will be more aggressive on this side of the border
• we still see USD/CAD moving above 1.40 in H2 2024

This article was written by Eamonn Sheridan at www.forexlive.com.