USD/CAD: Tighter financial conditions leave the loonie vulnerable over short-term – MUFG

The Canadian dollar weakened in August with that weakness unfolding in the second half of the month. Economists at MUFG Bank expect the loonie to remain weak through the remainder of the year before recovering in 2023.

Global equity market weakness lifts USD/CAD

“The comment from Fed President Kashkari effectively welcoming declines in equity markets does not bode well for risk assets more generally. That has implications for CAD given its strong positive correlation with US and global equity market performance.” 

“The speed of the tightening of monetary policy is likely to continue to weigh on the housing sector and with financial market conditions set to tighten further, we assume CAD will remain weak through the remainder of the year before recovering in 2023.”