The year-long forecast is for the loonie to rally to 1.31, compared to the 1.30 prediction in last month’s polling.
Read more: Growing recession fears dent Canadian dollar outlook
Bipan Rai, North America head of FX Strategy at CIBC Capital Markets, told Reuters: “We think that when it comes to central bank action that the Bank of Canada is going to end up with a lower terminal rate.”
“That implied spread between terminal rates in Canada and the United States will probably have to widen out further and that could take the U.S. dollar higher across the board including against the Canadian dollar,” Rai added.
The Bank of Canada raised its benchmark interest rate last week by 0.5 percentage points to 3.75%, falling short of forecasts for a further 75 basis point increase as it predicted the economy, with its oversized housing market, will stagnate over the next three quarters.
