Economists at Credit Agricole CIB Research maintain a bullish bias regarding the loonie and expect the USD/CAD pair to edge lower towards the 1.20 level by end-2022.

Prospects of high energy prices, a solid backbone for additional CAD gains

“The CAD has been supported by the combination of an extended rally in oil prices, as they were hardly impressed by the OPEC+ promise to ramp up production in the coming months; and a more hawkish BoC in June as it stands ready to act more forcefully after back-to-back 50bp rate hikes. At this stage, the second driver may not offer much more of a boost to the CAD in the near-term, unless the BoC is to step up its tightening with the delivery of a larger 75 bps rise in July."

"Ultimately, prospects of high energy prices for longer could be a more solid backbone for additional CAD gains further down the line, albeit coming more as a slow-burner support than an immediate boost.” 

“Our forecasts continue to look for USD/CAD to slowly drift towards 1.20 for the rest of the year."