Currencies have a mind of their own, often moving with little regard to model predictions, economic theory or common sense. That of course has never stopped economists and strategists from trying to forecast them. In that spirit, we suggest that the Canadian dollar is still mispriced. Too many factors are pointing in unison to one direction—a lower loonie.
First, the full cent drop in the currency following the Bank of Canada’s communication was highly predictable. It was an easy trade. And that trade is still very attractive.