• Entertainment
  • Finance
  • Marketing
  • Real Estate
  • Technology
  • Social
National Journal Community Of e-Experts
Finance 0

Canadian Dollar Outlook: Neutral As Currency Gets A Big Break

By Kurt Osterberg · On April 18, 2018

While the outlook for the Canadian dollar looked dire just a few months ago, the currency appears to have recently turned a corner. After looking oversold in late March, the currency managed to strengthen thanks to a rebound in crude oil prices. Two weeks later, the Canadian dollar received more good news as the Trump administration pushed to conclude NAFTA talks at a faster pace. In more recent times, the currency is strengthening once again as traders anticipate more rate hikes. Following the Canadian dollar’s rebound, we have upgraded our medium-term outlook on the currency to neutral accordingly. While the loonie’s comeback has been impressive, the longer-term outlook for the Canadian dollar remains neutral.

Bank of Canada tends to chase trends in growth and inflation

Looking at the BoC’s rate hikes last year, the institution was behind the curve in tightening monetary policy. Similar to other central banks, the Bank of Canada tends to chase growth and inflation once the trend has become fairly clear.

Looking more closely at the data, year-over-year Canadian GDP growth peaked last May (4.5%) and has been decelerating since that time. The impact from the Liberal government’s stimulus program (passed in 2016), came to fruition in 2017 as the government executed its incremental spending plans. Year-over-year growth was also high thanks to weak comparable figures in early 2016 (when growth was just 0.7% – 1.3%). This is shown below:

Both actual growth and future expectations appear to have peaked

Source: StatsCan, Markit, MarketsNow

While Governor Poloz provided neutral policy guidance in the first half of the year, the Bank of Canada shocked markets by raising rates in July 2017 (after growth had peaked). Since that time, the Bank has raised rates in September 2017 and again in January 2018, bringing the overnight rate to 1.25%.

Looking at the Canadian dollar, the currency has strengthened around recent Bank of Canada interest rate decisions. Unsurprisingly, speculators are keen to bet on the Canadian dollar when the country’s central bank is “normalizing” interest rates.

Print Friendly, PDF & Email

Share Tweet

Kurt Osterberg

You Might Also Like

  • Finance

    The Key to Continuing Productivity at Home

  • Finance

    Why Businesses Fail to Solve the Right Problem

  • Finance

    How to Track Business Expenses (And Why You Shouldn’t Put It Off)

No Comments

Leave a reply Cancel reply

Top Finance

  • Chart: Amazon’s Dominance In Ecommerce Chart: Amazon’s Dominance In Ecommerce
  • Shark Tank Recap: Shed Defender, Tata Towels and Sanaia Applesauce Secure Deals Shark Tank Recap: Shed Defender, Tata Towels and Sanaia Applesauce Secure Deals
  • Hedge Funds In The US Hedge Funds In The US
  • One Ring To Rule Them All One Ring To Rule Them All
  • Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates

New Posts

  • The Key to Continuing Productivity at Home

    The Key to Continuing Productivity at Home

    January 27, 2021
  • Why Businesses Fail to Solve the Right Problem

    Why Businesses Fail to Solve the Right Problem

    January 27, 2021
  • How to Track Business Expenses (And Why You Shouldn’t Put It Off)

    How to Track Business Expenses (And Why You Shouldn’t Put It Off)

    January 27, 2021
  • How to Get More Landing Page Engagement in 2021

    How to Get More Landing Page Engagement in 2021

    January 27, 2021
  • The Power of Renewal: How to Make This Year Better

    The Power of Renewal: How to Make This Year Better

    January 27, 2021
  • About
  • Contact Us
  • Privacy & Policy
  • Sitemap
  • Terms of use

Copyright © 2018 NJCEE. All Rights Reserved.