The Canadian Dollar was the third best performing currency in G10 in January. Economists at ING expect the USD/CAD pair to dip below 1.30 in the second quarter.
Some silver linings from CAD after BoC pause
“The BoC most likely hit the peak of its tightening cycle, as it brought rates to 4.5% and signalled more hikes are not on the cards for now. The dovish shift by the BoC was not a sudden move and had been largely priced in, which means that CAD can now potentially benefit from the fact that a lower peak rate means less economic impact and above all less pain for the troubled housing market.”
“CAD is not our favourite commodity currency for 2023 given a deteriorating domestic and US economic outlook, but can still count on respectable rate attractiveness and high-beta to risk sentiment.”
“A move below 1.30 in USD/CAD looks likely by the second quarter.”
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