Shifting dollar sentiment and what really drives US-Canada FX?

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

US-Canada FX Gyrates With Commodities, Pandemic

• Traditional economic data doesn’t fully explain CAD/USD fluctuations.
• Both nations have many economic similarities such as low, stable inflation.
• Canadian dollar has closely tracked commodity prices for two decades.
• Quantitative easing, pace of reopening economy have bolstered CAD.

Shifting Sentiment Weakens US Dollar

• US post-pandemic growth prospects lag many other nations.
• Europe has coordinated fiscal plan, China’s economy recovering.
• Will US recovery show signs of a bounce-back in Q3 2020?
• US might face headwinds in 2021 from mortgages, student loans.