Economic Outlook and Summary
As more of the population of both countries get vaccinated, the economy seems to be recovering. However, with new the Delta Variant, we aren’t out of the woods just yet. Bank of Canada seems to be confident with its economic recovery as the government does not make any changes to its current economic outlook or policies. The Federal Reserve seems to also have a similar tone to its economy as the Federal Reserve is closely monitoring the US’s economic recovery. Oil prices are expected to fall as OPEC increases production and is expected to outpace global consumption.
The USD and Federal Reserve
Things seems to be looking good for the Greenback so far; The Federal Reserve has reported that they are monitoring the economic recovery and adjust for inflation rate, but their adjustments will depend on how the economy reopens as it will run into bottlenecks, rehiring and possibly other constraints. The Federal Reserve also mentioned that their economic recovery still greatly depends on the virus. The US has also added 943,000 jobs and lowered its employment rate to 5.4% in the last couple of weeks.
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The Canadian Dollar and Bank of Canada
Canada’s economy seems to be well into its economic recovery as the Bank of Canada continues to apply its QE tapering; Canada has dropped its QE from $3 billion last week to $2 billion this week which is usually a sign to investors that the Bank of Canada thinks the economy is doing well. They also have mentioned that they are committed to keeping its current policies so that they can achieve and maintain 2% inflation by the second half of 2022.
Oil Prices
The demand for oil remains high, but not high enough to outpace OPEC’s increased production. Brent barrel are expected to fall from $75USD/Barrel to $72USD/Barrel. Gasoline prices are expected to fall from $3.14/gal to $3.12/Gal. Natural gas prices are expected to fall from $3.84 MMBTu to $3.71 MMBTu.
Forecast Table
| Bank | 2021 – Quarter 4 (USD/CAD) | 2022 – Quarter 1 (USD/CAD) |
| Scotiabank | 1.27 | 1.26 |
| Bank of Montreal | 1.23 | 1.22 |
| CIBC | 1.27 | 1.28 |
| TD Bank* | 1.24* | 1.25* |
| National Bank | 1.24 | 1.22 |
*Forecast based on previous month. Forecast Table is for mid-market rates, and subject to change anytime.
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