USD/CAD to rise over the next months on Fed tightening - Danske Bank

The greenback will rise versus the Canadian dollar in the coming months according to analysts at Danske Bank. They forecast USD/CAD at 1.30 in three months and at 1.32 in six months and 1.32 in twelve months. 

Key Quotes: 

“We believe that CAD on a longer-term strategic basis will face support from elevated commodity prices and rising demand for buying inflation protection – which Canadian markets deliver. Meanwhile, short-term we are still worried that global recession risks could lead to a setback to risk and by extension also deliver a hit to risk sensitive assets incl. CAD. Given CAD’s close connection to the USD and the US economy, the Canadian currency is better protected than most other growth-sensitive currencies – yet we still see topside to USD/CAD in our base case.”

“Bank of Canada continuing its tightening cycle will in isolation act as a supportive factor for CAD vs most other currencies but not vs the USD as we expect the Fed to deliver more tightening. We now forecast USD/CAD at 1.26 in 1M (from 1.28), 1.30 in 3M (from 1.31), 1.32 in 6M (1.35) and 1.32 in 12M (1.35).”