Cad To Strengthen On Rate Cuts

 Cad To Strengthen On Rate Cuts

Canadian Dollar (Cad) To Strengthen On Rate Cuts

According to forecasts, the Canadian Dollar (CAD) is expected to sustain its recovery against the US Dollar. This comes as the lower rates have boosted Canada's economic growth and improved the investor's appetite.

After hitting 1.3946 (low), Loonie has gained almost 3.3%, which is a testament to the strength of the Canadian dollar (CAD).

Canadian Dollar (Cad) To Move Towards 1.3275

According to most analysts, the Canadian dollar (CAD) will move higher to around 1.3275. That's higher than the earlier forecast of 1.3333.

The basis for these bullish forecasts is the BoC's decision to lower the rates. The Bank of Canada is also expected to lower the rates in the next few months by around 75 bps.

Just like any other economy, Canada is also no exception when it comes to interest rates. However, the Canadian mortgage cycle is way shorter than that of other big economies.

However, the household debt in Canada was 184% during 2023. That's the highest value among all the other G7 countries.

With the interest rate going down, it's only natural for the local economy to also go through a period of more spending. According to senior analysts, everything is lining up perfectly for another bull run in the Canadian dollar (CAD).

Canada is a leading producer of oil other commodities, which makes it more sensitive to any changes in the investor's sentiment.

With Trump getting into office in January, it remains to be seen how he will approach the tariff issue. If he indeed puts tariffs on Canadian products, it may pose a threat to the loonie.

Despite all of this, senior economists believe that 2025 will be a good year for the Canadian Dollar (CAD). Why? Trump will be imposing tariffs on pretty much every other country and these countries will respond with counter-tariffs.

So, in the short to medium-term, things will get expensive for the US consumers. So, it will effect the US economy more than other countries.

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