Goldman Sachs: CAD To Push Through “Fair Value”

Goldman Sachs have noted that "the Canadian Dollar is the best-performing G10 currency this year, including a 4% move against the USD since the Bank of Canada's April meeting, where it upgraded its growth outlook and announced a slower pace of asset purchases. As a result, CAD is now close to "fair value" on our standard metrics."

• "We see three reasons why moderate appreciation can continue where it is supported by an improving economic outlook. First, further oil price appreciation as economic demand recovers faster than supply should continue to provide the key pillar of support for CAD. Second, Canadian exports are particularly geared towards rates-sensitive parts of the U.S. economy that should continue to expand. Third, despite its recent gains, Canada's real effective exchange rate is still well below levels that would warrant a change in the policy outlook by itself."
• "We do not think this is enough to warrant a return to "oil supercycle" levels for USD/CAD, but still think there is good risk reward in CAD longs as one of the best expressions of the "reopening" and "reflation" themes in G10 FX. Therefore, we are lowering our USD/CAD forecast to C$1.19, C$1.17 and C$1.15 in 3, 6 and 12 months (from C$1.21, C$1.20 and $1.20 previously). Given our forecast that EUR/USD will reach $1.28 in 12 months, our new USD/CAD projections would keep EUR/CAD around current levels."