USD/CAD to stay closer to 1.20 rather than to 1.25 in 2022 – ING
17.11.2021, 14:41

USD/CAD to stay closer to 1.20 rather than to 1.25 in 2022 – ING

Economists at ING believe the bright outlook of the Canadian economy is set to fuel the Canadian dollar. They expect the USD/CAD pair to hover around 1.20 next year.

Loonie is the safest commodity currency

“We expect oil to average $76/bll (Brent) in 2022, with a gradual return to surplus driving prices moderately lower. Such a gradual downtrend should not be enough to undermine the recovery in the Canadian oil and gas industry. Being a very open economy, Canada is also set to benefit from the further recovery in global trade. As 70% of Canada’s exports head to the US, long-CAD should continue to be a proxy trade for the strong US growth story.”

“In Canada, the jobs market is at pre-pandemic levels, record-level investments keep supporting the growth outlook and a very successful vaccination campaign is allowing a loosening of the so-far very strict border policy. The domestic economic story is set to remain a positive for CAD, and partly shield it from any risk-off waves or USD appreciation.”

“We currently forecast four 25-bp rate hikes in 2022, so expect only limited scope for a re-pricing of tightening expectations.”

“Having the lowest volatility among G10 commodity currencies, CAD may emerge as a popular carry bet against low-yielders next year. We think CAD has the lowest downside risk in the commodity FX space and expect USD/CAD to stay closer to 1.20 rather than to 1.25 in 2022.”

 

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