The Loonie Facing Ciclycal Headwinds

Thu, Apr 10 2008, 14:24 GMT
by Economic and Strategy Team

National Bank of Canada


• Since the European Central Bank will soon have pressing reason to follow the Federal Reserve in cutting its policy rate and since recent Fed action to stabilize financial markets seems to be producing results, we think the greenback is very close to its low against the euro.

• The IMF now expects global growth to cool to 3.7% in 2008, with a 25% chance that it will fall below 3%. Global growth below the longterm trend would crimp demand for commodities and thus for cyclical currencies like the CAD and the AUD.

• Canada will be more specifically affected by recession in the U.S., the market for 30% of its GDP. The loonie will thus face multiple cyclical headwinds in the months ahead.



NBF Currency Outlook*
.Current 03-Apr2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2008 2009
CAD/USD 1.010 1.02 1.05 1.05 1.02 1.00 1.04 1.00
USD/CAD 0.995 98 95 95 98 100 96.6 100.0
USD/EUR 1.568 1.60 1.58 1.56 1.55 1.54 1.57 1.54
JPY/USD 102.2 100 95 90 93 93 95 93
USD/AUD 0.916 0.91 0.90 0.89 0.89 0.88 0.90 0.88
USD/GBP 1.996 2.02 2.05 2.03 2.02 2.00 2.03 2.00
AUD/CAD 0.925 0.93 0.95 0.93 0.91 0.88 0.93 0.88

Published on  Thu, Apr 10 2008, 14:24 GMT

National Bank of Canada  | 1100 University, 11th floor Montreal (Québec) H3B 2G7
http://www.nbc.ca/ | info@nbc.ca

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This presentation may contain certain forward-looking statements about the 2006 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.

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