Canadian Dollar Monthly Outlook September, 2017
Economic Outlook and Summary
The interest hike previously anticipated for October was accelerated to September, causing a prolonged CAD rally. The CAD climbed approximately 2 cents (climbing as high as 82 cents) as a result of an Overnight Rate that was increased to 1.00.
While devastating to local communities, the overall impact of the recent hurricanes that occurred in the United States left a minor dent to the overall growth of the US economy in Q3.
The Canadian economy has increased significantly the past quarter. Increased job and income growth in Canada has led to increased consumer spending. As regulatory housing policies settle in, housing markets continue to cool off and auto sales are at record highs. The service sector is stellar, particularly with wholesale and retail trade, transportation and financial and professional services.
Most banks have adjusted their position on the USD/CAD. Whether the greenback will appreciate in the upcoming quarters is conflicting among the banks.
Oil Prices
Talks of OPEC extending global oil restrictions have ensued. Oil prices have dropped on a few occasions in August as OPEC members continued to ramp up supply to compete with increased global oil supply with non-OPEC members. Oil prices closed at mid $47 on Friday, September 8, a significant decrease from a few days before.
The Canadian Dollar and Bank of Canada
Current rhetoric suggests that the Bank of Canada is looking to raise hikes once more in December and twice more in 2018. Assuming miniscule inflationary risks, the December hike can be pushed to as early as October. An early hike would result in further significant increases to the loonie.
US Dollar
The Feds are anticipating another hike in mid December after a likelihood of reduction of bond investments on September 20th. Similar to the Bank of Canada, the forecast was determined by incoming inflationary data suggesting the necessity of a tightening policy.
Within the past few quarters we’ve seen both countries implement hikes which has ultimately led to the appreciation to their dollar. A tightening policy from both countries would leave plenty of room for ambiguity among investors.
It’s too early to be making bets but that could change in the upcoming week.
FX Forecast Table September 2017
Bank |
2017 – Quarter 4 (USD/CAD) |
2018 – Quarter 1 (USD/CAD) |
Scotiabank |
1.20 |
1.18 |
Royal Bank of Canada |
1.24 |
1.27 |
Bank of Montreal |
1.30* |
1.30* |
Canadian Imperial Bank of Commerce |
1.30* |
1.33* |
Toronto Dominion Bank |
1.20 |
1.19 |
National Bank |
1.22 |
1.24 |
*As per August 2017 outlook
FX Forecast Table August 2017
Bank |
2017 – Quarter 4 (USD/CAD) |
2018 – Quarter 1 (USD/CAD) |
Scotiabank |
1.28 |
1.28 |
Royal Bank of Canada |
1.30 |
1.31 |
Bank of Montreal |
1.30 |
1.30 |
Canadian Imperial Bank of Commerce |
1.30 |
1.33 |
Toronto Dominion Bank |
1.28 |
1.27 |
National Bank |
1.29 |
1.30 |