FXStreet reports that the recent downgrade by Fitch for Government of Canada debt from AAA to AA+ coupled with dampening demand recovery for oil are likely to foster a further loonie depreciation. Therefore, economists at the National Bank of Canada target USD/CAD at 1.38 in the short-term.

“It is unfortunate that the Fitch downgrade occurred at a time when of a potential of dampening demand for oil because of tightening lockdown restrictions in some large US states because of Covid-19 cases.”

“We cannot ignore the fact that despite the new Canada-US-Mexico trade agreement, the US is contemplating imposing tariffs on Canadian aluminum.”

“We set our three-month target for the USD/CAD pair at 1.38.”