April 26, 2024, 03:15 PM

Desjardins FX Forecasts: Sees CAD Continuing To Slide Over the Coming Months

Desjardins on Friday noted the Canadian dollar lost just over 1% in April, though at one point during the month it was down more than 2%. According to Desjardins, investors still aren't betting on Canada's monetary policy diverging significantly from that of the United States, but it said the Bank of Canada has good reasons to start cutting rates sooner. It noted several inflation measures have come down and are unlikely to rise again given that the Canadian economy has slowed considerably. "That said," it added, "the BoC won't be able to blaze ahead with several rate cuts while the Fed stands pat. Doing so would send the Canadian dollar plunging too low, which in turn would drive up import prices and feed inflation."

Desjardins said the Canadian dollar will likely continue to slide over the next few months. It expects the BoC to announce two rate cuts -- one in June and another in July -- before the Fed starts its monetary easing in the fall. In the coming months, there's a good chance the Canadian dollar will approach CA$1.40/US$, Desjardins said. However, the loonie could start recovering before the fall in anticipation of US rate cuts, it added.

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