USD/CAD: Moderate potential for further Loonie recovery – Commerzbank

Most  recently, USD/CAD has principally trended upwards. But economists at Commerzbank see moderate upside potential for the Loonie.

US debt ceiling row versus rate hike expectations

“CAD is unable to keep up; and clearly the uncertain outcome of the row about the debt ceiling is having a bigger effect than the rising rate expectations for Canada (stronger compared with the US).”

“From our point of view this entails moderate potential for further CAD recovery against USD once it becomes clear that an agreement can be reached at the last minute.”

“It cannot be excluded that the market will also see a higher likelihood of a Fed rate hike after the US debt conflict is resolved, but CAD should at least be well supported against a Dollar which remains in good demand.”