USD/CAD could decline to the 1.25 level towards the end of 2023

At the time of writing, the is trading at 1.3362 versus the previous closing rate at 1.3327. In 2023, the Canadian Dollar may emerge as a more attractive financial asset in the face of fluctuations. Economists believe that the USD/CAD pair could drop to the 1.25 level.

Overall commodity picture should prove rather supporting the Canadian dollar in 2023. Economists also expect Brent to average slightly above $100/bbl next year, and Western Canadian Select around $85/bbl. Along with our expectations for higher fuel prices, the overall commodity picture should prove rather supportive for the CAD in 2023.”

The base-case scenario, given the continuation of global risk sentiment gradual recovery, the Canadian dollar would be in an advantageous standing, 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 a further deterioration in risk sentiment, economists expect room for a descent in USD/CAD to the 1.25 level towards the end of 2023.