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- USD/CAD to tick down as the BoC set to move ahead of the Fed – MUFG
USD/CAD to tick down as the BoC set to move ahead of the Fed – MUFG
During November, the Canadian dollar weakened versus the US dollar from 1.2394 to 1.2803. In the view of economists at MUFG Bank, the CAD should gradually recover with the Bank of Canada (BoC) set to move ahead of the Federal Reserve (Fed), but these gains will be modest.
The market is priced for notable tightening by the Fed
“The prospect of a faster QE taper and at possibly three rate hikes by the Fed will limit the scope for the Canadian dollar to recover vs the US dollar over the near-term.”
“A rate hike in Q2 2022 is priced and could well be delivered but if global conditions are more challenging next year the BoC just like the Fed is unlikely to deliver what is currently priced in the market.”
“We expect crude oil prices to begin correcting lower from Q2 next year. So while we expect the BoC to lead the Fed and for CAD to recover, the move stronger will be modest given global conditions and the gradual decline in crude oil prices.”
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