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CANADA: Scotia See Risk Of USDCAD Getting To 1.45 A Lot Sooner

CANADA
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Scotia write that recent Canadian political developments have increased the risk that USDCAD gets to 1.45“a lot sooner” than their post-election call for 1.45 in 2H25 before staying there to year-end. 

  • “Our fair value model shows USDCAD trading one standard deviation above estimated equilibrium (1.4165) today. Spot’s estimated fair value has been creeping higher since late November.”
  • “If the political scene goes quiet over the holidays, the CAD may be able to steady. There is a late year kink is USDCAD’s seasonal profile that typically sees a small CAD rally into year-end. But markets are likely to come back with a vengeance in the new year.”
  • “January is the best calendar month of the year for the USD against the CAD (average monthly return of +0.5% over the past 25 years). USD strength tends to persist deeper into Q1 before the CAD—usually—recovers in Q2/Q3.”
  • “Mounting political risk in Canada suggest the USD is liable to start 2025 with a bit of a bang. A push to 1.45 (and potential overshoot) risks coming a lot earlier next year than we had imagined.”
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Scotia write that recent Canadian political developments have increased the risk that USDCAD gets to 1.45“a lot sooner” than their post-election call for 1.45 in 2H25 before staying there to year-end. 

  • “Our fair value model shows USDCAD trading one standard deviation above estimated equilibrium (1.4165) today. Spot’s estimated fair value has been creeping higher since late November.”
  • “If the political scene goes quiet over the holidays, the CAD may be able to steady. There is a late year kink is USDCAD’s seasonal profile that typically sees a small CAD rally into year-end. But markets are likely to come back with a vengeance in the new year.”
  • “January is the best calendar month of the year for the USD against the CAD (average monthly return of +0.5% over the past 25 years). USD strength tends to persist deeper into Q1 before the CAD—usually—recovers in Q2/Q3.”
  • “Mounting political risk in Canada suggest the USD is liable to start 2025 with a bit of a bang. A push to 1.45 (and potential overshoot) risks coming a lot earlier next year than we had imagined.”