The Cnandian economy will need more policy easing than the 25bp "insurance" rate cut announced in January. Another rate cut is expected before year-end. As those conditions and that scenario play out this summer and beyond, that will be result in renewed CAD weakness. However, the near-term drivers and backdrop are working more in the CAD's favour, and look to keep the CAD better supported in the coming months than previously expected.
"In light of these developments, are adjusting to the USD-CAD forecasts. Only modest gains in the currency pair is likely through Q2 and Q3, up to 1.25 and 1.26 respectively, with more pronounced weakening later in the year to 1.30," notes HSBC in a report on Friday.
