If the US Dollar weakens in general, it is likely to do so against the CAD, too, economists at Société Générale report.
Fed and BoC to ease monetary policy at a similar pace to each other
The biggest drivers for USD/CAD could be the general direction of the USD (which we expect to weaken as US growth slows) and relative changes in Canadian and US long-dated bond yields. A declining US yield environment and a weaker dollar should drag USD/CAD lower in the absence of new idiosyncratic drivers of CAD.
In a not very imaginative forecast, we expect USD/CAD to fall to around 1.3% next year, as US yields fall (10s trading down to 3.75%) and the Fed and Bank of Canada ease monetary policy at a similar pace to each other.
