The Canadian dollar will weaken slightly in the fourth quarter as the Federal Reserve outperforms the Bank of Canada (BoC). However, CIBC Capital Markets economists report that the Canadian dollar will gain ground in 2023 as the dollar loses ground.
CAD to weaken, before getting stronger in 2023
“The Fed’s announcement in late September and widespread risk aversion have pushed the dollar onto a stronger trajectory, and the loonie has depreciated as a result. More of the same is likely to happen as a gap in terms of the maximum point of monetary policy rates, and that weak global growth favors the dollar and limits any rise in commodities.
“A run to 1.40 is very possible, and a bounce later in the year should still see the CAD in the 1.38 territory.”
“In 2023, we see room for broad USD softening as the Fed pauses hikes below current market expectations, which will see the CAD end the year stronger, with USD/CAD in 1.32″.
“The loonie could still finish 2024 stronger, with USD/CAD at 1.28, helped by expectations of a rebound in global growth and commodity prices in 2025 that would benefit Canada’s export sector.”
Source: Fx Street
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