In light of recent events, analysts at Danske Bank revised to the upside their forecasts for the USD/CAD for the next quarters. They do not see a rate hike in Canada before April. 

Key Quotes: 

“Bank of Canada has ended its QE program and continues to guide towards the first rate hike in the “middle quarters” of 2022. Meanwhile, market are priced much more aggressively and not only price a full hike in Q1 2022 but also an accumulative 5 hikes over the coming year. In our view, that looks slightly overdone and our base case remains that the first rate hike will not come before April.”

“Fundamentally, we still like to treat USD/CAD as a low beta version of USD/NOK, which is due to the CAD’s closer connection to USD and lower sensitivity to oil than NOK. We still favour more topside to USD/CAD – albeit less topside than in USD/NOK – and in light of the recent rise in the cross we adjust our forecast profile to 1.28 in 1M (from 1.26), 1.30 in 3M (from 1.29), 1.32 in 6M (from 1.31) and 1.33 in 12M (unchanged).”

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