The USD/CAD pair is seen trading higher over the coming years as economists at Danske Bank expect to see a stronger USD. Nonetheless, with the BoC set to hike rates, the CAD should limit its decline.

Forecast: 1.26 (1M), 1.29 (3M), 1.31 (6M), 1.33 (12M)

“In light of our expectations of a stronger USD and an eventual setback to reflation sensitive assets we therefore still pencil in a higher USD/CAD over the coming years.”

“Also with the latest move in relative rates we could see more support from markets pricing in forthcoming rate hikes from the Bank of Canada – which in turn should cap the topside. We expect the BoC to hike policy rates in Q3 2022 and deliver a subsequent additional 3 hikes by end 2023.”

“We forecast USD/CAD at 1.26 in 1M (from 1.27), 1.29 in 3M (unchanged), 1.31 in 6M (from 1.32) and 1.33 in 12M (unchanged).”