07:01 AM EST, 12/06/2024 (MT Newswires) -- The Canadian dollar (CAD or loonie) has held up comparably well following the United States November

elections and has continued to largely function as a US dollar (USD) proxy, said UBS.

The bank doesn't see this changing next week, despite its

expectations for a 50bps rate cut by the Bank of Canada

(BoC) at Wednesday's meeting.

Inflation has come down to the midpoint of the target

range and risks to growth are looming, stated UBS. While the latest job market data was strong enough to pull a jumbo cut into question, the BoC hasn't really pushed back against dovish market expectations.

US-Canadian rate differentials are likely close to their peak, wrote the bank in a note to clients. Going into 2025, the Canadian economy should benefit from lower financing costs and find a bottom.

While they constitute a major downside risk, UBS thinks President-elect Donald Trump's tariff plans will likely be

softened.

USDCAD has broken through 1.40 recently, but the bank believes further upside risks are limited. UBS wouldn't

chase CAD weakness in the crosses at this point, given

elevated bearish positioning.