Economic Outlook and Summary
The greenback continues to rise, hovering close to yearly highs as we look forward to the new year. The recently discovered Omicron covid-19 variant proved to be a slight hiccup to policy makers’ forward guidance, however it seems as though there will be no major changes in government strategy moving ahead. This uncertainty lowered oil prices at the beginning of the month, but they have since recovered.
The USD and Federal Reserve
Historically, the Greenback has fallen during the last month of the year. However this does not seem to be the case so far in December 2021. It has become clear that the US Federal Reserve will have to react to price pressures and rising consumer inflation. The need to end quantitative easing and raise rates has driven the US dollar close to yearly highs this past week. We are entering into a tightening phase of monetary policy as inflation rises and remains pervasive. US Federal Reserve policy proves to be the most significant determinant of USD/CAD price action compared to other factors at the moment, such as the price of oil or gold. Another factor to consider is the ongoing Evergrande crisis in China. Looming concerns over the health of China’s property sector is shifting investor confidence away from real estate investments to capital markets investments. Further stress on the Chinese real estate sector could potentially spill over into US markets once again and is something to keep an eye on.
Don't Waste Money With Banks.
Get Exchange Rates Up to 2% Better With KnightsbridgeFX
The Canadian Dollar and Bank of Canada
The Bank of Canada recently held its December policy meeting, suggesting that forward guidance remained in place, albeit cautiously. This wariness is due to the looming threat of new Covid-19 Omicron variant and recent flooding in British Columbia, which threatens to create more supply chain disruptions. The BoC meeting went largely as expected with no major changes to rates. Despite previous reports of a resilient Canadian labor market, the central bank still issued caution with respect to the end of low rates. Additionally, global health experts seem to echo that the omicron variant may not cause much disruption, and the strength of the Canadian economy will put the BOC in place to raise rates in 1Q’22.
Oil Prices
Brent crude oil prices have elevated in the second half of 2021 as the global economy recovers from the disruption of the global pandemic. Omicron caused a major dip at the start of December down to $69/b, but the price has since recovered to $76/b with the trend looking to continue as the year wraps up. The price of natural gas has coincided with this pattern and we can expect winter temperatures to be a key driver of natural gas consumption and price going into 2022.
Forecast Table
| Bank | 2022-USD/CAD Q1 | 2022-USD/CAD Q2 |
| Scotiabank | 1.22 | 1.21 |
| Bank of Montreal | 1.27 | 1.27 |
| CIBC | 1.28 | 1.29 |
| TD Bank | 1.23 | 1.23 |
| National Bank | 1.24 | 1.20 |
Forecast Table is for mid-market rates, and subject to change anytime.
We are built to beat bank exchange rates and save you money
KnightsbridgeFx is registered with FINTRAC, under the MSB registration number M09819788. Like most financial institutions, we are required to validate the identity of all clients. We have strict measures in place to protect your privacy.
Our Offices
Main office (Appointment only)
First Canadian Place
100 King Street West
Suite 5700 Toronto, ON,
M5X 1C7
(416) 479-0834
Toll-Free: 1-877-355-5239
Fax: 1-877-355-5239
All rights reserved. Knightsbridge Foreign Exchange
Currency Exchange Canada.
