USD/CAD to plummet towards 1.22 once current covid wave has passed – NBF

The Canadian dollar has taken a beating in recent weeks, depreciating nearly 10 cents against the US dollar. The evolution of the pandemic has led economists at the National Bank of Canada to delay an appreciation of the loonie. Subsequently, they forecast the USD/CAD pair at 1.22 once the current covid wave has passed.

See: USD/CAD may suffer a major fall to the 1.20 level – Commerzbank

Interest-rate spreads still favour the loonie

“We still believe that the Bank of Canada will maintain its lead over the Federal Reserve in terms of tapering quantitative easing and the timing of potential hike rates (we still expect the BoC to raise interest rates in Q2 2022). We, therefore, believe that short-term interest rates will remain in Canada’s favour for the foreseeable future.”

“Most commodities are still up so far in Q3, employment still suggests above-trend growth for the national economy, and COVID-19 is not putting undue pressure on the health care system. Nevertheless, the evolution of the pandemic has led us to delay an appreciation of the CAD. We expect USD/CAD to sink to 1.22 once the current coronavirus wave has passed.”