Canadian Dollar Forecast: USD/CAD Chasing Oil, CAD Data Key for BoC Hike

CAD, USD/CAD, Analysis and Talking Points

• Canadian Data In Focus for Near Term BoC Outlook
• Canadian Dollar Underpinned by Oil

Canadian Data In Focus for Near Term BoC Outlook

Today will see the first of two major data points that could cement a January rate hike from the Bank of Canada. The BoC Business Outlook Survey, which is a key input for the central bank’s assessment of the economy will likely remain. However, a key caveat is that the Q4 survey will likely have captured the period prior the spread of the Omicron variant and subsequent lockdown. That being said, a strong report will be enough to see an increase in tightening bets and thus underpinning the Canadian Dollar. In turn, should a strong report today be followed up with a higher than expected inflation print tomorrow, it will be harder to argue against a January hike. Although, as I have noted before, the aggressive market pricing for 2022 remains a tall order.

Source: Refinitiv, DailyFX

Canadian Dollar Underpinned by Oil

Taking a look at the Canadian Dollar, given the continued rise across the oil complex, the Canadian Dollar is likely to play catch-up and thus another move towards 1.2450 is in sight, should 1.25 give way.

Canadian Dollar vs Brent Crude Futures

Source: Refiniiv

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