08:21 AM EDT, 06/27/2025 (MT Newswires) -- Since the start of the year, several Canadian core inflation

measures have gradually risen, exceeding the Bank of

Canada's 1%-3% target range in April, said UBS.

While May's reading edged slightly lower, the bank doesn't believe this represents sufficient progress for the BoC to resume rate cuts in the near term.

As a result, rates-related downside risks to the Canadian dollar (CAD or loonie) should remain limited at current levels, stated UBS.

Meanwhile, the bank's base case anticipates three rate cuts by

the Federal Reserve this year -- more than what is currently priced into futures markets. This should put depreciation pressure on the US dollar (USD) over time and support the UBS view for a lower USDCAD.

The bank expects the September low of 1.34-1.35 to be revisited later this year and UBS would use the recent USD rebound as an opportunity to reduce exposure.