Analysts at CIBC, point out that the Canadian Dollar is outperforming other commodity currencies, despite Canadian commodity prices are underperforming. But they warn it could all change in 2020.
“Even after this week’s turbulence, the C$ (CAD) is still by far the best performing commodity currency year-to-date and recently hit a multi-decade high against the NOK. That currency outperformance has come despite an (admittedly minor) underperformance of Canada’s tradeweighted commodity index. However, this could change if and when the Bank of Canada follows the global trend of reducing interest rates, and we recently brought forward our expectation of a BoC rate cut to Q1 2020.”
“So while the loonie could rally in the near-term if the Bank doesn’t cut quite as early as markets now think, the C$ could weaken more meaningfully next year when that move finally happens, with USDCAD reaching 1.38 by end-2020.”