USD/CAD: Merrill Lynch is targeting 1.33 by the end of the second quarter

Merrill Lynch believes that at current levels, the Canadian dollar is likely to be incorporating into its price something close to the best-case scenario (ie soft NAFTA negotiations), a subtle US rate hike US for the next two years and a barrel price near its highs.

We are of the opinion that negotiations will be easy regarding NAFTA but it is possible that we will have four rate increases from the FED this year instead of 3. And three more in 2019.

We are also of the opinion that currency divergence is in favour of a rising USD/CAD. We are targeting 1.33 by the end of Q2." says Merrill Lynch.