The fall from Crude oil prices helped USD/CAD rise above 1.2900 on Monday, after having been weighing heavily on the Canadian dollar. Nevertheless, for ING analysts, the BoC tightening could push the pair below 1.25 by the end of 2022, unless oil undergoes another big correction.
Waiting for some drag effect
“The Bank of Canada rose 100 basis points at the last meeting, but we expect a more moderate pace of tightening from now on. Our base case is a 50 basis point hike in September (markets are currently pricing in 58 basis points).”
“Early BoC tightening should leave the loonie with some trailing edge, but we still expect that edge to fully materialize beyond the short term once market sentiment has stabilized.”
“Barring another big correction in oil prices, a move below 1.25 by the end of the year in USD/CAD still looks possible.”
Source: Fx Street
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