USD/CAD could now break below 1.3000 quite soon, economists at ING report.
Loonie has the best volatility-adjusted carry in the G10 space
The extra hike by the BoC and no pushback against further moves in the future mean that CAD can keep benefitting from an attractive carry.
It’s worth remembering that the Loonie has the best volatility-adjusted carry in the G10 space. We don’t necessarily see this as the inception of a broader USD downtrend, but the close USD/CAD correlation also means that CAD is more shielded in the event of a USD rebound than other pro-cyclical currencies.
A move below 1.3000 is surely possible in the coming weeks, although we may need to wait the fourth quarter of this year to see USD/CAD sustainably trade around 1.27/1.28.
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