USDCAD: Risks seen to be on the upside – Commerzbank

USDCAD slipped below the 1.35 mark last Friday. However, economists at Commerzbank are sceptical as to whether the Loonie will be able to make further ground against the US Dollar. 

Bank of Canada interest rates expected to peak at 4.6%

“Whereas the market expects BoC interest rates to peak at 4.6%, it seems to expect Fed rates to peak at just under 5.3%. The drift regarding rate hike expectations might shrink again if the BoC managed to sound hawkish, but that seems less likely to us at present.”

“And if the market really were to price in higher rate hikes on the part of the BoC, concerns about more pronounced effects on the housing market and the increased likelihood of a (deeper) recession should also have an effect. The latter would hardly be CAD-positive.”

“Moreover, USD remains the market’s preferred currency in case of rising risk aversion in its role as a safe haven.”