Forecasts for USD to CAD
According to recent exchange rate forecasts, the outlook for the USD to CAD exchange rate suggests a potential reversal in the US dollar's strength in 2023. Economists expect this to occur as the Federal Reserve's interest rate hikes cycle comes to an end. Currently, the USD to CAD exchange rate sits at 1.3468, just above its 3-month average, indicating relative stability within a 4.4% range.
The struggles of the Canadian dollar against the US dollar are attributed to the risk-on and risk-off environments in financial markets rather than the fundamentals of the US and Canada. Both economies are strongly correlated. Additionally, factors such as continued declines in housing prices and adverse wealth effects could exert negative pressure on the Canadian dollar in 2023.
It is worth noting that the Canadian market heavily relies on the US as its largest oil consumer, with the US consuming 20 million barrels per day compared to its own production of around 12 million barrels. Any significant trends in the Brent Crude OIL/USD price data, such as the recent 11.7% increase above its 3-month average, could impact the Canadian dollar due to its status as a major oil exporter.
Overall, the market view suggests a potential reversal in the USD to CAD exchange rate's current stability in 2023, as the US dollar's strength is expected to abate following the conclusion of the Federal Reserve's interest rate hikes cycle. However, external factors such as oil price movements and their impact on the Canadian economy should also be closely monitored.
