USD/CAD could trade closer to 1.25 than 1.30 by the end of the year – ING

He Bank of Canada surprised markets with a 25 basis point rate hike. The ING Economists discuss USD/CAD prospects after decision.

BoC hardening returns

The BoC has resumed raising interest rates after a five-month hiatus. Another rise in July seems likelybut we are wary of pushing for more aggressive action.

The rise of the BoC caused a drop in USD/CADand now the pair is targeting test the lows of November 2022, at 1.32/1.33. Below that level, we would be attentive to the evolution of the USD/CAD. Below there, the next key support level for the pair would be 1.30..

Our forecasts for the USD/CAD before the BoC they were targeting 1.30 by the end of the third quarter. We now believe that the chances of a 1.30 hit in early summer are quite high..

Later in the year, a negative repricing of US growth expectations and possible Fed rate cuts in late 2023 may negatively affect the CAD and we expect it to lag other procyclical stocks later in the year. year. But further BoC tightening means USD/CAD could trade closer to 1.25 than 1.30 by the end of the year.