USD/CAD: Loonie still points to the downside in the short-term – MUFG

The Canadian dollar has been underperforming in recent months driven more by domestic drivers. The Bank of Canada acknowledged economic weakness in Q2 but showed no caution over plans to continue tightening monetary policy going forward. Economists at MUFG Bank expect CAD to remain under pressure near-term.

BoC acknowledges softer growth as CAD continues to underperform

“The BoC provided a largely unchanged policy signal and only acknowledged that the Canadian economy unexpectedly contracted in Q2.” 

“The BoC remains optimistic though that the economy will rebound strongly in the second half of this year supporting a further scaling back of QE purchases as soon as at their next meeting.”

“We still believe risks remain tilted to the downside in the near-term for the loonie although we don’t expect recent weakness to be sustained.”