The loonie is the ‘safe-haven’ among high-beta currencies, meaning it suffers less during risk-off periods but tends to underperform in broad-based USD declines, especially if driven by worsening US macro news, ING’s FX analysts Francesco Pesole and Chris Turner note.

A gradual downward-sloping profile for USD/CAD

“Incidentally, the Bank of Canada has continued to cut rates in line with our call. With the Fed now expected to cut 100bp by year-end, the BoC may cut 25bp at each of the last three meetings of 2024. After all, the CPI picture has improved dramatically in Canada while the jobs market has loosened.”

“We retain a gradual downward-sloping profile for USD/CAD in line with the broader USD call and as BoC cuts are fully priced in. Also, CAD is in a fundamentally safer position compared to almost any other pro-cyclical currency in a Trump 2.0 scenario.”