In 2023, the Canadian Dollar may emerge as a more attractive pro-cyclical bet. Economists at ING believe that the USDCAD pair could plunge to the 1.25 level.
Overall commodity picture should prove rather supportive for the CAD in 2023
“We expect Brent to average slightly above $100/bbl next year, and Western Canadian Select around $85/bbl. Along with our expectations for higher gas prices, the overall commodity picture should prove rather supportive for the CAD in 2023.”
“In our base-case scenario, where global risk sentiment gradually recovers but two major risk-off forces – Ukraine/Europe and China – remain, CAD would be in an advantageous position, since Canada has much more limited direct exposure to China and Europe compared to other commodity exporting economies.”
“Accepting the downside risks stemming from the housing market and/or a further deterioration in risk sentiment, we see room for a descent in USDCAD to the 1.25 level towards the end of 2023.”