Further CAD weakness is likely if the inflation data slowdown is confirmed – economists at Credit Suisse now see USD/CAD at 1.4100 by the end of Q4.

Markets eye an early end to Bank of Canada tightening

“Markets now anticipate the BoC to hike rates at the next two meetings and start easing as early as Q1 2023. If the BoC were to validate this shift in expectations, USD/CAD price action would likely become mainly a function of US yields. Conversely, pushback from the BoC against the early priced in end to the tightening cycle can bring local idiosyncrasies back to the fore in USD/CAD. This calls for a wide range approach: we see USD/CAD trading between 1.3250 and 1.4300 in Q4.”

“Uncertainty about BoC policy and high realized sensitivity to risk sentiment lead us away from the resilient CAD view we held in Q3: we now see USD/CAD ending Q4 around 1.4100.”