CAD will bounce side-to-side around the 1.27 anchor point in 1Q18 - ING

The Canadian dollar has been one of the outperformers this year, although its sharp 10% rally since bottoming in May was partly an unwind of political and financial stability concerns, points out the research team at ING.

Key Quotes

“NAFTA risks mean that the tide will remain high for the CAD early next year - although we do expect the currency to hold on given that we believe such risks have already been adequately priced in. This suggests that USD/CAD will bounce side-to-side around the 1.27 anchor point in 1Q18. Beyond this, we do see CAD as the darling of the dollar bloc amid an outperforming Canadian economy, the resumption of the BoC's hiking cycle and reduced sensitivity to supply-driven oil price moves. USD/CAD medium-term bias is towards 1.20.”