The Canadian Dollar was the second best performing G10 currency in June. Economists at MUFG Bank analyze USD/CAD outlook.

US recessionary conditions tend to result in CAD weakness

We believe CAD performance reflects the ongoing resilience of equity markets but suspect that we could soon see a correction to the downside which will increasingly weigh on CAD. History of CAD movement also indicates US recessionary conditions tend to result in CAD weakness. 

The strong inter-linkage for the Canadian economy means expectations of weaker growth in Canada will intensify, helping drag CAD lower.

Given the scale of drop in USD/CAD of late, we have altered our USD/CAD forecast profile to show a clearer path higher given our view of the limits of CAD strength from current levels.