Canadian dollar likely to appreciate in medium term, USD/CAD to trade around 1.23 by end-2018 – Lloyds Bank

Market conditions have been conducive to the Canadian dollar strength since mid-May, when the Canadian dollar weakened to a year-to-day low of 1.38 against the U.S. dollar, noted Lloyds Bank. A series of impressive Canadian data releases such as monthly GDP growth of 4.6 percent year-on-year in May and an unexpected decline in the jobless rate to 6.3 percent in July, along with the Bank of Canada hiking interest rates in June and adopting a more positive tone, have sent Canadian government bond yields to new multiyear highs, stated Lloyds Bank.

Moreover, oil prices have based around USD 45/bbl and subsequently rallied back above USD 50/bbl. A period of consolidation for USD/CAD is anticipated from here. A corrective retracement in USD/CAD to 1.28 is expected by the end of the third quarter. But the Canadian dollar is expected to continue to appreciate in the medium term. The resilient risk environment and potential for oil prices to extend their upward trend should drive further CAD buying, stated Lloyds Bank.

“We expect USD/CAD to move towards 1.23, by end-2018”, added Lloyds Bank.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bullish at 84.4629, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -56.0505. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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