USD/CAD: what is needed to drive the loonie higher? - Scotiabank

In respect to the Canadian dollar's performance and outlook, analysts at Scotiabank explained that political risk las loomed large over the USD in recent weeks and the Russia investigation cloud seems unlikely to dissipate. 

Key Quotes:

"Broadly, we are more bearish on the USD now as the rebound in the global economy has narrowed the US’ growth advantage and central banks beyond the Fed are becoming active, reducing the USD’s yield advantage."

"However, the CAD has rallied a long way in a short space of time, looks fully priced to reflect reasonable central bank expectations over the next few months and will look well overcooked in the event of a hawkish surprise from the Fed in the second half of the year."

"We think fresh new incentives are needed to drive USD/CAD significantly lower from here—a more hawkish BoC, a more dovish Fed, firmer crude oil prices or a further deterioration in the US political backdrop—all of which are potential developments in the next few months—but absent fresh incentives, we feel the USD slide may be close to being played out in the short run."