USD/CAD to reach 1.2500 in three months - Goldman Sachs

According to a note from Goldman Sachs, the Bank of Canada's (BoC) path on interest rate hikes could see the USD/CAD reach 1.2500 within the next quarter.

Key quotes

"Despite the latest miss on retail sales and CPI, the broadern macro picture still looks encouraging and our economists expect the BoC to hike rates at the next policy meeting on 24 October. Even though a 25bp hike is nearly fully priced and softer headline inflation probably gives the Governing Council more comfort in raising rates only gradually, the economic projections in the Monetary Policy Report seem most likely to be revised a bit higher, primarily due to a smaller drag on the outlook from trade policy uncertainty on the USMC deal announcement."

"Despite less conviction on the tone from the BoC this week, we continue to see scope for CAD outperformance vs USD over the next 3 months as more hikes get priced in for 2019-barring any persistent shifts in activity or inflation data-and short positioning sets up for potential unwinds on any positive policy or data surprises."