USD/CAD to reach 1.31 before retracing towards 1.27 by year-end – CIBC
13.05.2022, 06:28

USD/CAD to reach 1.31 before retracing towards 1.27 by year-end – CIBC

The slide in CAD in recent weeks reflects a broadly stronger greenback. Economists at CIBC Capital Markets think the loonie will follow broad USD sentiment and is likely to depreciate a touch in the near-term before retracing that ground over the balance of the year.

CAD a bit weaker again in 2023

“With inflation at higher levels stateside, and growth further above pre-pandemic levels, the Fed’s hawkishness could maintain USD strength in the coming months, especially as it leads in its tightening cycle relative to what’s being seen abroad.”

“We could see the CAD weaken a touch into mid-year, with USD/CAD at 1.31. However, over the second half of the year, we see scope for the loonie to regain lost ground, as the market dials down its hawkish view on the Fed and the USD softens by year-end.”

“The move stronger in the loonie in H2 will be limited by the market simultaneously paring BoC rate hike expectations when the Bank reverts to quarter point hikes later in the year, and USD/CAD is expected to end the year at 1.27.

“With the BoC not expected to take rates above the US in 2023, and overall softer commodity prices that year as global growth slows, we have the CAD a bit weaker again in 2023.” 

 

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