April 2021: FX Outlook
The Canadian dollar continues to perform strongly this quarter as about 20% of the Canadian population has been vaccinated and the promise of the 80% of all Canadians being vaccinated by the end of June is big step towards normalcy and a pre-pandemic economy. Gains in oil prices as the US and Canadian attempts to reopen are a great contributor to their respective economies. In addition, commodities such as lumber and metal continue to be in high demand in response to the thriving Canadian housing market.
President Joe Biden announced that new stimulus for the U.S. economy was in the works via an infrastructure plan that could exceed $2 trillion over the next 8 years. This has led to investors pushing U.S. bond yields higher to back where it was before the pandemic. However, the US GDP is still down 2% from its pre-pandemic levels.
The Canadian Federal Government’s $101.4 billion growth plan in this year’s Federal Budget seems to be very helpful to households in this pandemic battered economy. The plan includes spending $1 billion to revitalize our tourism industry; $17.6 Billion in a green recovery plan to reach to conserve 25% of Canada’s lands and oceans; and $30 Billion to establish a Canada-Wider early learning and childcare system. The new spending might lead to a stronger Canadian dollar.
The BoC surprised markets with a hawkish tilt. The BoC upgraded their 2021 GDP growth forecast by a whopping 2.5% to 6.8%. They said, “the economic outlook has improved due to the resilience of Canadian households.” This month, they predicted a rate hike in the second half of 2022. This caused the Canadian dollar to rally to the USD 0.80 cent level.
||2021 – Quarter 3 (USD/CAD)
||2021 – Quarter 4 (USD/CAD)
|Bank of Montreal
|Canadian Imperial Bank of Commerce
|Toronto Dominion Bank*
*Forecast based on previous month. Forecast Table is for mid-market rates, and subject to change anytime.
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By Writer | April 25, 2021 | Monthly Canadian Dollar Outlook/Forecast | 0 comments