Canadian Dollar Monthly Outlook October 2016
October 2016
It is expected that the US Dollar will continue strengthen, as potential interest rate hikes in the US this year and next year have not been fully priced into the market. It is ostensibly unlikely the US Dollar will lose its strength over the long term. The Canadian Dollar (CAD) seemed to gain additional strength into the recent month due to commodity prices rising. The Organization of the Petroleum Exporting Countries (OPEC) has made progress towards implementing supply management, which caused oil prices to rise. This is because the oil industry has become more competitive and innovative, resulting in greater supply from sources such as US. Canadian oil producers understand that restraining output is likely to drive prices higher, but can also result in lost market share.
As Iran has returned to the global oil market due to lifted sanctions, OPEC is likely to come under increased pressure from such competition, as overall supply increases. Iran has been able to grow its oil output faster than all of OPEC. The increase in oil output in Iran within the first half of this year was large enough to more than offset the decline in the United States. Furthermore, there is a massive current account deficit in Canada that is equal to about 4% of Canadian Gross Domestic Product (GDP), which has also put pressure on the Canadian Dollar. Expectations for CAD are bearish, but it may see occasional boosts in strength, providing buying opportunities. Foreign investment in Canada remains crucial in order to strengthen the Canadian Dollar and areas such as public and private sector investment in Canada remain integral focus areas.
It seems as though the European Central Bank has not been able to ground its monetary policy to start stimulating the economy effectively. The economy remains stagnant with the EURO not gaining strength relative to where it was before the Brexit decision. Demand remains weak within the European Union even with negative interest rates. For example, non-performing loans remain high in nations such as Italy. The European Central Bank put forward the fact that it is important for the national governments in the European Union to contribute effective policy measures from a national level and intact them so the economies can connect and ensure economic growth as a whole. The European Central Bank remains less active so that its national economies can share the burden and do their part in growing the economy. Additionally, the GBP has continued its post-Brexit struggles, falling to new lows.
FX Forecast Table
Bank |
2016 – Quarter 4 (USD/CAD) |
2017 – Quarter 4 (USD/CAD) |
Scotiabank |
1.30 |
1.25 |
Royal Bank of Canada |
1.33 |
1.30 |
Bank of Montreal |
1.315 |
1.277 |
Canadian Imperial Bank of Commerce |
1.34 |
1.33 (Q2 2017) |
Toronto Dominion Bank |
1.36 |
1.32 (Q3 2017) |
National Bank |
1.36 |
1.34 |
Knightsbridge Foreign Exchange has based the opinions expressed herein on information generally available to the public. Knightsbridge Foreign Exchange makes no warranty concerning the accuracy of this information and specifically disclaims any liability for trading decisions based on the opinions expressed and information contained herein. Such information and opinions are for general information only and are not intended to present advice with respect to matters reviewed and commented upon.
By Admin | October 7, 2016 | Monthly Canadian Dollar Outlook/Forecast |
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