USD/CAD to plummet towards 1.20 by late 2022 as BoC hikes rates ahead of the Fed – BMO

Bank of Canada's hawkish pivot put some wind under the Canadian dollar's wings in October, though it has since weakened on a modest pullback in energy prices. Still, economists at the  Bank of Montreal see the USD/CAD diving to 1.20 by late 2022. 

Possible need to raise rates as early as next spring

“With the pandemic clamping down on supply and potential growth, the Bank sees the output gap closing sooner, in either Q2 or Q3 of 2022 when rate hikes would be expected to begin. As a result, we advanced the timing of the expected initial rate hike by several months to July 2022. A series of quarterly rate hikes should return the current 0.25% policy rate to a more neutral 1.75% by late 2023.”

“We see the loonie cruising moderately higher to 1.20 by late 2022 as the Bank hikes rates ahead of the Fed.”

See: Loonie to appreciate against most currencies as BoC moves to raise interest rates – Morgan Stanley