- Markets may be underestimating the risk of a US-Canada trade war, which could push USD/CAD to 1.53 or higher.
- A potential Canadian recession could prompt the Bank of Canada to cut rates to 1.50%, significantly below current market expectations.
Deutsche Bank thinks markets may be underestimating the risk of a trade war between the US and Canada.
In its analysis, the bank suggests that USD/CAD could rise to “at least” 1.53, with the potential to test the 2002 all-time high of 1.61. A trade war could push Canada into a recession, prompting the Bank of Canada to cut interest rates to as low as 1.50%, significantly below the 2.75% currently priced in by markets.
The Trump administration’s relationship with Canada may set a baseline for its broader trade policies, indicating that the potential impact on other trading partners’ currencies might currently be underestimated by the market too. EUR/USD comes to mind in this regard.
Currently, USD/CAD has been trading within a tight range of 1.4260–1.4465 for over a month. The pair maintains a bullish outlook, supported by a rising 50-day Exponential Moving Average (EMA), which is currently around 1.4235.
For the exact date and time of these major economic events, import the BlackBull Markets Economic Calendar to receive alerts directly in your email inbox.
