We expect the CAD to depreciate further against the USD this year. USD/CAD is forecast to trade between 1.26 and 1.30 over the next few quarters before declining back to 1.20 late in 2016.
This is important for the economic outlook, as the expected pickup in Canadian net exports reflects both stronger demand growth from the US and more competitive Canadian exports due to the weaker CAD.
Our forecast reflects the impact of oil prices and growth differentials, and thus the rate spreads between the currency pair.
For the last decade or so, CAD offered a way for investors to make bets on the direction of global oil prices. In addition, uncertainty over the strength of the rebound in Canadian growth will likely keep the BoC on the side lines for some time as the Fed begins rate normalisation later this year.
This expected policy divergence should keep USD/CAD well supported until the BoC begins to normalise policy – perhaps in late 2016.
This content has been provided under specific arrangement with eFXnews.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD retreats to 1.0750 area as USD recovers
EUR/USD stays under modest bearish pressure and trades slightly below 1.0750 in the European session on Wednesday. Hawkish comments from Fed officials help the US Dollar stay resilient and don't allow the pair to stage a rebound.
GBP/USD drops below 1.2500 ahead of Thursday's BoE event
GBP/USD stays on the back foot and trades in negative territory below 1.2500 after losing nearly 0.5% on Tuesday. The renewed US Dollar strength on hawkish Fed comments weighs on the pair as market focus shifts to the BoE's policy announcements on Thursday.
Gold stays near $2,310 as US yields edge higher
Following a quiet Asian session, Gold retreated slightly to the $2,310 area. Hawkish tone of Fed policymakers help the US Treasury bond yields edge higher and make it difficult for XAU/USD to gather bullish momentum.
SEC vs. Ripple lawsuit sees redacted filing go public, XRP dips to $0.51
Ripple (XRP) dipped to $0.51 low on Wednesday, erasing its gains from earlier this week. The Securities and Exchange Commission (SEC) filing is now public, in its redacted version.
Softer growth, cooler inflation and rate cuts remain on the horizon
Economic growth in the US appears to be in solid shape. Although real GDP growth came in well below consensus expectations, the headline miss was mostly the result of larger-than-anticipated drags from trade and inventories.