The Canadian dollar was the top performer today, knocking USD/CAD down to 1.4194
Barclays Research discusses USD/CAD outlook and adopts a bullish bias expecting the pair to rally through 1.47 in Q2.
"The loonie has taken a severe hit from the COVID-19 pandemic, which has led markets to hoard USD amid the imminence of a global recession that will affect the Canadian economy through a number of channels. Oil prices have dropped to unsustainable levels below the cost of production, which could lead to production curtailments in Canada," Barclays notes.
"On the domestic front, rail blockades have been temporarily suspended as the government managed to reach a tentative deal with the indigenous groups but a collapse in talks could aggravate the supply chain disruptions. Canada has announced a fiscal stimulus and tax deferral package worth 4% of GDP and aid to the tourism, airline and energy sectors that have been hit the hardest. Once the virus concerns settle and fiscal and monetary stimuli kick in, we expect the loonie to regain some lost ground during the second half of the year," Barclays adds.
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