USD/CAD to race higher towards 1.32 by Q3 2022 – CIBC
22.12.2021, 07:46

USD/CAD to race higher towards 1.32 by Q3 2022 – CIBC

The loonie was on a rollercoaster at the onset of the discovery of the omicron variant but has since come full circle, and is sitting marginally weaker. As markets price matching rate hike cycles across the Canada-US border, USD/CAD is set to rally early in 2022, analysts at CIBC Capital Markets report.

Loonie to start the New Year with a whimper 

“We expect that as QE tapering winds down and the first Fed hike is delivered in Q2, markets will move to price in more Fed action, pushing USD/CAD to 1.32 in Q3 2022.”

“Weighing on the loonie in early 2022 will be a lack of upside in commodities. Demand for oil will be hampered in the near term by the spread of omicron globally. Thereafter, the potential for OPEC+ to ramp up oil supply during the recovery will put a cap on prices. A return to more travel will also bring back Canada's typical deficit in tourism services trade.”

“By late 2022, we expect to see a shift in the tides for the loonie, as the market will likely have come around to our view on Fed hikes for the post-2022 period, and the broad trend in the USD could therefore be towards a greenback depreciation as other advanced economy central banks move to normalize rates. However, CAD will still only be a marginal beneficiary of that trend, as the bigger news will be a turn towards tighter monetary policy in lagging regions like the eurozone.”

 

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