A number of central banks of the G10 nations have cut their key interest rates, but the Bank of Canada has adopted a wait-and-see stance, with the result that the key interest rate in Canada is now the highest among the G10 nations.
Given this backdrop, and underpinned by a strong economy, the Canadian dollar is expected to strengthen against the US dollar in the quarters ahead.
“The BoC is likely to welcome the fact that CAD will appreciate only moderately, as excessive appreciation might put pressure on the export sector”, said Commerzbank in a research report.