07:33 AM EDT, 10/02/2024 (MT Newswires) -- Neither rain, nor snow, nor weak oil prices and negative rate differentials are causing the Canadian dollar (CAD or loonie) to stray too far from its sideways path, said CIBC, adding it expects more of the same over the upcoming quarters.

At this point, with the United States Federal Reserve also on board with significant rate cuts, and like the Bank of Canada, still early in that process, markets aren't going to be as sensitive to which central bank's turn is next, and whether an individual move was 50 or 25 basis points, stated CIBC.

In any event, CIBC's endpoint for overnight rates in Canada (2.25%) and the US (3.38%) doesn't materially change interest differentials from where they've been of late. Oil prices are likely to recover some lost ground next year as rate cuts reduce global recession risks, but not to levels where the bank would expect a huge lift to Canadian growth from energy sector capital spending.

Meanwhile, the US is itself now a significant oil producer, so the differences versus Canada in a rising oil environment aren't what they once were, it pointed out.

That leaves Canada as a low-beta follower of the overall direction of other major currencies versus the US dollar. The bank looks for a modestly stronger loonie in 2025 as the US dollar sheds some of what it gained by being a carry recipient.

US fiscal and trade policies could alter that view after the US elections, but at this point, there's too much uncertainty about who will take the White House, the makeup of Congress, or which presidential campaign pledges would actually see the

light of day, to factor that into any significant degree, added CIBC.