BCA Research sees downside risk for the Canadian dollar as global growth slows, it said in a research note released Wednesday.

“The [Canadian dollar] has drifted steadily higher in recent weeks, supported by firm oil and commodity prices and some mega M&A deals. However, the unfolding U.S. and global economic slowdowns indicate this recent strength won’t last,” it says.

“A moderation in Canadian growth is virtually inevitable given the strong correlation with the U.S. business cycle. Canada’s manufacturing exports are already contracting as U.S. demand weakens. More importantly, a pullback in oil and base metal prices is likely as global growth moderates in the months ahead, which will drag down Canada’s terms of trade and undermine the Canadian dollar,” BCA adds. “Look for the Canadian dollar to weaken against the U.S. dollar as the global economy slows.”