USD/CAD: LOONIE SHIELDED FROM LARGE SWINGS AS LOWER BETA STATUS SHOULD CONTINUE – CIBC

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USD/CAD has not generated a lot of excitement of late. Economists at CIBC Capital Markets analyze the pair’s outlook.

USD/CAD to end 2024 at 1.28

Matching 25 bps rate hikes by the Fed and the BoC in September would be a bit more of a surprise to current market pricing for the former, but if both signal a pause thereafter we don’t see that rocking the CAD boat too much, and expect USD/CAD to hover near 1.33 through the end of Q3.

In 2024, we see both the BoC and the Fed likely to begin cutting rates in Q2, making a broad depreciation in the USD the main force behind an expected appreciation in the CAD.

While we expect USD/CAD to end 2024 at 1.28, that modest move reflects Loonie’s low-beta status. In the absence of huge swing in resource prices or a Canada-specific shock, that suggests that the Loonie will be shielded from large swings, and will see a more modest appreciation in 2024 than some other majors.

 


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