The loonie weakened in the third quarter despite fundamentals that remained relatively constructive for the Canadian economy. Looking ahead, economists at the National Bank of Canada expect the USD/CAD pair to edge lower towards the 1.20 level in the next year.

Better days ahead for the loonie

“Given that we do not see a significant drop in energy prices in the coming months, we believe that the CAD should appreciate against the USD.”

“Given the recent performance of Canadian labour markets and the positive outlook for commodity prices and nominal GDP, we continue to expect another round of QE tapering from the Bank of Canada in October.”

“Given our upwardly revised forecast for the price of oil and natural gas, we now see USD/CAD at 1.20 in 2022.”