FXStreet reports that according to economists at the Bank of Montreal, the USD/CAD pair is expected to end the year around 1.25.

“Canada's economy is projected to grow 5.0% in 2021, the best year since 2000 and somewhat above the consensus view. After contracting about 5.5% in 2020, GDP should retrace its losses by year-end.”

“With permanent job losses accounting for a third of the 1.6 million unemployed in November, the jobless rate will decline slowly, likely ending the year at a still-high 7.0%. As a result, the Bank of Canada is expected to keep policy rates near zero.”

“The Canadian dollar is expected to strengthen modestly to $1.25 by late 2021. This is near purchasing power parity, limiting its impact on the economic recovery though keeping the trade deficit large. The loonie should benefit from firmer resource prices as global demand improves and from further weakness in the trade-weighted greenback as safe-haven demand fades.”