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- USD/CAD: A rate hike by the BoC might not lead to lasting loonie strength – Credit Suisse
USD/CAD: A rate hike by the BoC might not lead to lasting loonie strength – Credit Suisse
Economists at Credit Suisse preview next week’s Bank of Canada (BoC) rate decision, where risks of a hike have increased. However, they still stick to their 1.25 target for the USD/CAD pair.
Range dynamics to become prevalent again in USD/CAD
“Ahead of next week’s Bank of Canada rate decision on 26 Jan, risks of a 25bp hike are on the rise. We are however not looking to lower our 1.2500 USD/CAD target, as we ultimately see range dynamics becoming prevalent again in USD/CAD.”
“With energy prices as a key marginal driver of inflation expectations in both the US and Canada, we are fundamentally sceptical of lasting policy divergence prospects between the Fed and the BoC.”
“In the event of a rate hike, we see scope for USD/CAD to undershoot our 1.2500 target as far as the Oct ’21 lows around 1.2300, at which point positioning for a bounce-back towards 1.2500 will become attractive.”
“USD/CAD rallies in the event of an unchanged BoC outcome will likely meet sellers around 1.2630.”
See – Canadian CPI Preview: Forecasts from five major banks, on a thread to stay below 5%
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