http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/http://www.fxstreet.com/fundamental/http://mediaserver.fxstreet.com/images/fxstreet-provider-logo1-en.gif7http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-11-05.htmlOn the basis of purchasing power parity, the euro and the yen, the two most important currencies next to the U.S. dollar, are more than 20% over-valued against the greenback. The financial markets have not budged much in recent months with respect to the Fed’s monetary policy. However, we are of the opinion that the foreign exchange markets have begun to fear a change in the Federal Reserve’s tone. This, combined with the negative medium-term factor of a strong over-valuation, leads us toThu, 05 Nov 2009 10:39:40 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-11-05.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-10-05.html• Our scenario calling for an appreciating USD is not unfounded. For one, labour productivity is taking giant steps forward in the United States while it is backpedalling in the euro zone. • The euro zone faces a double threat in that it must cope with negative productivity growth together with a loss of competitiveness resulting from the past appreciation of its currency. This is why we are reiterating our scenario calling for a depreciation of the euro over the coming quarters. • Two-yearMon, 05 Oct 2009 14:49:18 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-10-05.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-08-31.htmlAfter some 20 months of downturn, there is at last a light on the horizon for the United States and confirmation that economic recovery is under way. With the end of the financial crisis near, we believe the financial markets will soon cease to trade the USD as a function of risk aversion or appetite and get back to basics, focusing on the cyclical backdrop to the U.S. economy. The keystone of our currency scenario is an imminent return to job creation in the United States, which will forceMon, 31 Aug 2009 16:24:40 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-08-31.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-08-12.htmlEquity Watch One of the factors that propelled the markets over the past few weeks is strong earnings surprises. In the current earnings season, companies announced earnings results that were 10.9% above expectations in the U.S. and 8.9% in Canada. These positive surprises are leading analysts to increase their outlook. Over the past three months, the 12- month forward earnings have been revised upward by 1.5% in the U.S. This is the most positive revisions since 2005. In Canada, revisions areWed, 12 Aug 2009 16:48:33 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-08-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-07-13.htmlThe last thing the euro zone needs is an appreciating currency. As a result of the reversal of the safe-haven effect on the greenback begun a few months back, the euro remains over-valued in trade-weighted terms. In addition to Ireland having its credit rating downgraded recently by Standard & Poor’s, the ECB’s firepower is petering out again: Money-supply growth in Europe has just reached a 12-year low. Given that the U.S. leading economic indicator is back in positive territory for theMon, 13 Jul 2009 09:20:19 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-07-13.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-06-09.htmlStandard & Poor’s downgrading of its credit rating outlook on the United Kingdom from stable to negative rattled the exchange markets and caused the fiscal sustainability of the principal advanced economies to be reassessed. Normally, the desynchronization of U.S. and European monetary policies will push the greenback to gain at least 10% on the euro over a period of one year. In the next 12 to 18 months, the positive cyclical forces of the greenback should dominate the negative structuralTue, 09 Jun 2009 08:54:13 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-06-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-05-05.html* We are sticking with our scenario in favour of a greenback rally. Through its multiple interventions, the Federal Reserve has managed to set the U.S. money supply on an uptrend. The same can’t be said for the ECB. While the M2 aggregate is skyrocketing in the United States, European money supply growth is slowing. * According to the IMF, the European banking system is exposed to more than $1000 billion in toxic assets. We remain convinced that the ECB will have no choice but to resort toTue, 05 May 2009 16:31:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-05-05.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-04-09.htmlThe Federal Reserve surprised the exchange market this past March 18 by announcing the aggressive injection of new liquidity in the economy, including the purchase of $300 billion of U.S. Treasuries. The news prompted the euro to react violently against the greenback. However, we are of the opinion that the greenback will resume its positive momentum against the euro. The European currency’s recent appreciation reflects the fact that the ECB still lags behind the other central banks. Indeed,Thu, 09 Apr 2009 06:23:05 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-04-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-03-05.html• Numerous observers have attributed to the yen the same safe-haven currency status as to the greenback in this global recession. However, the yen has now begun to lose some of its shine. • The yen broke away from the pack in recent months. The Japanese currency’s appreciation against many other Asian currencies has been nothing short of spectacular and reflects a meteoric rise in the real trade-weighted exchange rate. • Over the long run, exchange rates constitute factors that help regulateThu, 05 Mar 2009 10:39:15 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-03-05.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-02-19.html• With nearly all key rates in the world today at floor levels, monetary policies are likely to have less influence on exchange markets. This clears the stage for the greenback, which enjoys the status of safe-haven currency in times of global recession. • Both fundamental and circumstantial factors suggest that the greenback bull market remains intact. The U.S. trade deficit now stands at only 3.5% of GDP and the recent correction has picked up sharply. • With economic activity in JapanThu, 19 Feb 2009 11:33:34 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2009-02-19.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-11-11.htmlThe U.S. dollar continues its rise from the ashes, but the steepness of the ascent is such that we are seeing extremely acute movements in the foreign exchange market. Faced with a dramatic deterioration in the global economy, the principal central banks have decided to take the bull by the horns, enacting a flurry of policy rate reductions. Of these monetary authorities, though, the ECB is the one that has done the least so far with cuts amounting to no more than 100 basis points. As itTue, 11 Nov 2008 08:25:41 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-11-11.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-10-08.html• The spillover effects of the U.S. financial crisis call for concerted action from the world’s principal monetary authorities, including a key-rate cut by the ECB. Meanwhile, the U.S. dollar continues to appreciate despite the absence of monetary tightening expectations in the United States, thereby signalling the definitive end of the greenback bear market. • In today’s world economic slowdown, the Japanese yen constitutes a special case, as it is expected to appreciate in lockstep with theWed, 08 Oct 2008 15:45:58 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-10-08.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-09-09.html- The greenback's fundamentals are getting better. With world crude oil prices down and the U.S. consumer recession choking imports, a substantial improvement in the U.S. trade deficit is under way. - Moreover, the current world economic slowdown has created an environment propitious to the greenback. Indeed, as a safe-haven currency, the U.S. dollar has tended historically to gain in value from 5% to 15% in trade-weighted terms when the global economy nears a cyclical low. Consequently, weTue, 09 Sep 2008 08:07:29 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-09-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-08-12.html- After trading within a narrow range since the beginning of the year, the loonie has lost altitude, breaking through a key technical support level on its way down. - The world economy is losing steam, which means commodity prices will fall, taking the cyclical currencies down with them. Consequently, we are lowering our forecast for the loonie and now expect it to trade within USD 0.90-0.92 by the beginning of next year. - As most of the bad news regarding the U.S. economy has already beenTue, 12 Aug 2008 07:49:49 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-08-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-07-09.html• The latest move by the ECB has lifted the real key rate in Europe to +25 basis points against -200 in the United States. However, we do not believe that the European monetary authority will need to tweak the real rate any higher. The ECB has drifted a good distance away from real indicators and may be seriously jeopardizing growth in the process. • The current EUR/USD exchange rate has factored in an overly aggressive increase in European interest rates, which should work against the euro inWed, 09 Jul 2008 15:58:55 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-07-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-06-13.html• Unlike the financial markets, we doubt the Fed will tighten between now and early 2009. But rate rise or no, speculators and other traders will have taken note of the Fed’s intention to protect the exchange value of the U.S. dollar. • At this writing the Canadian dollar is trading below 98 cents US for the first time since early May. It has fallen four cents in just one month despite the soaring price of oil. • The U.S. downturn is making itself felt in Canada, which is headed for an excessFri, 13 Jun 2008 14:24:25 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-06-13.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-05-06.htmlThe downward trend in the U.S. dollar which started in February 2002 has now lasted for more than 73 months. Has the greenback bottomed out? Meanwhile, with U.S. inflation still fairly high, the Fed is aware of the risk of overshooting in rate cuts and signalled April 30 that it plans to stay on the sidelines for a while. So short-term cyclical factors will also tend to buoy the greenback against the euro. The Canadian economy, though apparently better off than the American, is slowing at aTue, 06 May 2008 12:47:05 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2008-05-06.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-06-22.htmlThe Canadian dollar surged to a 33-year high after stronger-thanexpected economic growth and a pick-up in inflation prompted the Bank of Canada to switch to a tightening bias. Even though long-term fundamentals remain positive for the loonie, the extent of its appreciation since the month of March leaves it poised for a period of consolidation. Brazil’s restructuring of recent years is paying dividends in economic lift. Credit upgrades, high interest rates and well-contained inflation suggestFri, 22 Jun 2007 10:45:45 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-06-22.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-05-02.htmlThe U.S. dollar came under siege in April from the difference between the U.S. economic outlook and the outlook for the rest of the world. Since we think this trend will continue for both cyclical and structural reasons, we are staying with our forecast of a 10% depreciation of the greenback in 2007. The expected narrowing of Canada - U.S. interest rates and strong demand for commodities in response to economic growth outside North America will provide further support to the Canadian dollar inWed, 02 May 2007 15:34:56 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-05-02.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-04-04.htmlThough the Federal Reserve kept its policy rate unchanged in March, it dropped mention of a tightening bias from its statement and left no formal guidance on its future direction. This shift, in combination with Washington’s turn to a more protectionist attitude toward non-market economies, is likely to make the exchange market more volatile. The yen appreciated strongly against many currencies from late February through mid-March, mainly because of reversals of carry-trade positions. In ourWed, 04 Apr 2007 14:40:21 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-04-04.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-03-01.htmlWeak economic reports from the U.S. over the past couple of weeks have altered expectations for the future course of monetary policy in that country. At this writing, we continue to see the U.S. dollar index losing 6% over the course of the year. The Canadian dollar has firmed against the greenback in recent weeks but the rise could prove to be ephemeral. In our view, a combination of factors will send the loonie retesting its recent low of about 1.18 to the USD in the coming weeks. The CADThu, 01 Mar 2007 09:54:49 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-03-01.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-01-23.htmlThe Canadian dollar has been caught in a downdraft so far this year, a victim of lower commodity prices and lacklustre economic reports. At this point we have not changed our view that the CAD will weaken against the EUR and the JPY and strengthen against the USD in the second half of the year as U.S. fundamentals deteriorate. Our forecast average value of the CAD against the USD in 2007 is lowered from 88 to 85 cents US to reflect a change in our timing of the U.S. interest-rate cut.Tue, 23 Jan 2007 12:00:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2007-01-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-12-01.htmlThe Canadian dollar has lost some ground since the federal government’s surprise October 31 ruling on income trust taxation. This said, the long-term fundamentals underpinning the loonie were enhanced by Ottawa’s intention to eliminate net government debt and to establish the lowest tax rate on new business investment in the G7. The Canadian dollar has been more volatile than the Australian in recent months, a historically unusual state of affairs. In our view, the exchange rate between theFri, 01 Dec 2006 12:13:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-12-01.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-11-02.htmlThe USD may be benefiting from a cyclical reprieve currently but make no mistake, it remains structurally challenged. In our opinion the growing U.S. current-account deficit continues to argue for further depreciation of the tradeweighted U.S. dollar. We still estimate the probability of a recession in the U.S. in 2007 at 40%. For the Canadian dollar, the long-term fundamentals remain positive but cyclical headwinds are likely to keep it in its recent trading range through the end of 2007.Thu, 02 Nov 2006 08:51:11 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-11-02.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-09-21.htmlThe Federal Reserve’s move to the sidelines in August after seventeen 17 consecutive rate hikes puts U.S. monetary policy on a path diverging from the rest of the G-7. A swift cooling of the housing market leaves U.S. consumers facing an erosion of their home-equity wealth effect and the U.S. economy facing a few quarters of below-trend growth. We recently raised the probability of a U.S. hard landing to 40% and accordingly anticipate a need for Federal Reserve rate cuts in 2007.1 ThisThu, 21 Sep 2006 09:38:21 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-09-21.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-07-06.htmlWith U.S. monetary policy poised to diverge from the path of the rest of the G-7, the USD is on the eve of its first serious stress test in this business cycle. While the Federal Reserve seems to be looking for a pause after 17 consecutive rate hikes, the European Central Bank and the Bank of Japan are likely to continue removing liquidity, possibly at a much faster pace. This development will reduce the current U.S. rate-spread advantage and foreigners’ appetite for USD-denominated assets.Thu, 06 Jul 2006 04:23:20 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/forex-currency-outlook/2006-07-06.html