The National Bank of Canada revised its year-end target for the pair USD/CAD from 1.27 to 1.32. However, they warn that the reopening of the Chinese economy, together with the interruption of the supply of raw materials due to the war in Ukraine, will help limit the depreciation of the Canadian dollar.
Canadian GDP Weak = BOC Pause
“Although job creation remains strong, a lackluster GDP report and slower-than-expected inflation point to a divergence in monetary policy between Canada and the United States. Although our new spread forecast is not good news for the Canadian dollar in the near term, we continue to believe that the reopening of the Chinese economy, coupled with the disruption in the supply of raw materials due to the war in Ukraine, will help limit the depreciation of the CAD.”
“Under our new US scenario for growth and interest rates, we see USD/CAD staying in the 1.36-1.39 range through the first half of 2023, before rallying in the second half of the year when the Fed finally end your tightening campaign. Our new end-of-year target is 1.32 (1.27 previously).”
Source: Fx Street
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