📝High Crude Prices Won't Lead Investment Flows to CAD: BMO

Amid the U.S. dollar’s strengthening trend, the loonie has been weakening, averaging C$1.370 (US$0.730) in October. In the past 18 years, the currency has only been this weak (or weaker) on two occasions, March-May 2020 at the onset of the pandemic and December 2015-February 2016 owing to the collapse in oil prices. With the Bank of Canada likely no longer keeping pace with Fed rate hikes (75 bps vs 100 bps) and stopping sooner (January vs March), we look for the loonie to weaken further despite stable prospects for oil prices. Favourable oil prices simply don’t fuel the investment flows (and capital inflows) they once did. After averaging around C$1.38 (US$0.725) in December, we look for the loonie to appreciate more than 4% against the greenback (to C$1.325 or US$0.755) by the end of next year on broad weakness in the big dollar. - BMO