Above: Governor Macklem might be too optimistic on near-term Canadian economic performance says Bank of America. File image: Bank of Canada. Up, down and up again is how to describe the path of the Canadian Dollar over the coming days, weeks and months, according to the latest assessment from Bank of America. In the wake of the Bank of Canada's interest rate hike delivered on July 12 analysts at the Wall Street bank say the Canadian Dollar can extend its strength over the coming one to two weeks. The USD/CAD selloff for the past week (-1.55% since July 6) has been aggressive, ranking at 96th percentile vs the past 10 years, explains Howard Du, an analyst at Bank of America. When USD/CAD has sold off by more than the past week in the last 10 years, we find the sell-off tended to continue for the next two weeks, with a hit ratio of 64% and median loss of another 0.4%. The Dollar-Canadian Dollar exchange rate (USDCAD) fell a third of a percent on Wednesday after the BoC lifted the cash rate to 5.0% after observing more persistent excess demand in the economy. The move was exacerbated by an undershoot in U.S. inflation, a development taken into account by Du when he says, USD/CAD could fall to somewhere around the year-to-date low of 1.3117 on the back of broad-based post-CPI USD weakness. Turning to a one to two-month timeframe, Bank of America says there is scope for a pullback in the Canadian Dollar. For one, analysts reckon the Bank of Canada's latest projections for the economy are too optimistic: The BoC revised 2023 growth forecast higher from 1.1% to 1.8% while only slightly revised down 2024 forecast from 1.9% to 1.5%. Above: Latest BoC growth forecast is optimistic vs our forecast: BofA. Chart shows annual growth forecast for Canada. These growth projections along with Governor Macklem's response in the press conference suggest to us the BoC leans more towards the no-landing camp for growth, says Du. Bank of America sees at least a moderate downturn by H1 2024 for developed countries that have aggressively raised policy rates over the past year, which includes Canada. Any downside surprise in the economic data before the next BoC meeting in September should lead to the rates market pricing out rate hikes for rest of the year and for USD/CAD to retrace toward our Q3 forecast of 1.32, says Du. Above: CAD risks. Canada has one of the highest household debt to GDP ratio in the world - BofA. Chart shows household debt to GDP ratio for major countries. Looking towards year-end and the multi-month timeframe, Bank of America expects the Canadian Dollar to ultimately recover and push USD/CAD lower again. We have had an out-of-consensus bullish CAD view since the start of this year. For now, the macro drivers for CAD still remain favourable, and we would maintain our downtrend forecast path for USD/CAD where we see the pair reach 1.30 by the end of the year, says Du. Bank of America equity strategists see upward momentum in the equity markets, to which USD/CAD is negatively associated, meanwhile, energy prices have also rallied back to be more in line with the bank's commodity research team's forecasts. Risks to the currency would include a more severe hit to indebted Canadian households as a result of rising interest rates. Latest BoC rate hike has indeed raised the odds of a growth hard landing for Canada, which would increase the risk to our bullish CAD forecast should Canada experience a sharper growth shock than the US due to central bank overtightening, says Du. Above: CAD risks. Household debt service ratio is close to 2008 level - BofA. Chart shows Household debt service ratio (saar).
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The Canadian Dollar fell across the board after Canadian inflation numbers for January undershot expectations and raised the odds of a rate cut at the Bank of Canada happening as early as April.
Canadian Dollar Forecast: Geopolitics & Bank Of Canada To Set The Tone For Usd/cad
The Pound to Canadian Dollar exchange rate (GBP/CAD) remains well supported on a technical basis, according to a new analysis from a leading Canadian bank.
Canadian Dollar exchange rates are looking increasingly constructive as markets fade bets for an imminent rate hike at the Bank of Canada amidst fears of persistently sticky Canadian wage pressures.
The Canadian Dollar will appreciate against the Euro, Pound and U.S. Dollar over the duration of 2024, according to the latest currency research update from the Royal Bank of Canada., list:[To purchase foreign currency online, you must have a Bank of America checking or savings account, Purchases above USD$1, 000 must be picked up at a financial center, Minimum purchase amount is USD$100, Maximum purchase amount is USD$10, 000], footer:Not enrolled in Online Banking?
Loonie Bulls Reel As Bank Of Canada Trails Fed On Terminal Rate Bets
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Bank of America customers with a Bank of America checking or savings account can order up to USD$10, 000 in foreign currency over 30 days, whether that purchase is made in one or several transactions.Get more details on buying foreign currency
Bank of America account holders can exchange foreign currency (no coins) for U.S. dollars at a full-service financial center. Use our foreign currency calculator to find out how much your foreign currency is worth in U.S. dollars.Bank of America says it holds a positive outlook on the Canadian Dollar in 2023 and is more bullish on the currency's prospects than implied by the consensus forecast (see above). This is because the focus of the foreign exchange market will shift away from inflation to growth in the coming months; and on this metric, Canada is well poised. We expect a shallower recession for Canada vs the US, and the relatively better growth prospect should support the CAD in 2023, says Howard Du, G10 FX Strategist at Bank of America. The CAD was resilient for most of 2022 but sold off after September as investors focused on the imminent rate hike pause from the Bank of Canada (BoC), adds Du. We expect the market to look past the CAD weakness from 2022. The BoC hiked interest rates aggressively in 2022 but expectations of a pause started to build by September, pressuring Canadian bond yields lower which in turn dragged on the Canadian Dollar. The Canadian dollar was resilient for most of 2022. However, it has been selling off aggressively since September, says Yu. Bank of America expects the BoC to be amongst the first of the developed market central banks to pause the tightening cycle. Oil prices - another key driver for the Canadian Dollar - peaked in June and trended lower into year-end, offering another narrative for CAD underperformance in the latter part of 2022. But Bank of America does not expect the slide in oil to extend and this should boost the value of Canada's export basket and underpin foreign exchange earnings. Constructive equity and energy outlooks for 2023 should also support the CAD, says Yu. Above: USD/CAD sensitivity to crude oil is close to zero - Bank of America. Bank of America expects the United States to replenish its strategic petroleum reserves (SPR) from February 2023, which should drive the value of U.S. West Texas Intermediate (WTI) grade oil to $94/barrel. The SPR was emptied in 2022 as President Joe Biden sought to cushion U.S. consumers from a global energy price spike, boosting the supply of high-quality WTI into the U.S. market which suppressed demand for Canadian grades. Our energy outlook would suggest a bullish outlook for CAD with more significant sensitivity to the rising crude oil price in 2023, says Yu. A boost to the country's oil earnings is expected by economists to underpin Canada's economy in 2023
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You can pick up your order at a financial center or have it mailed to you. Your order is $1, 000 or more, so you need to pick it up at a financial center. Start My Order
Bank of America customers with a Bank of America checking or savings account can order up to USD$10, 000 in foreign currency over 30 days, whether that purchase is made in one or several transactions.Get more details on buying foreign currency
Bank of America account holders can exchange foreign currency (no coins) for U.S. dollars at a full-service financial center. Use our foreign currency calculator to find out how much your foreign currency is worth in U.S. dollars.Bank of America says it holds a positive outlook on the Canadian Dollar in 2023 and is more bullish on the currency's prospects than implied by the consensus forecast (see above). This is because the focus of the foreign exchange market will shift away from inflation to growth in the coming months; and on this metric, Canada is well poised. We expect a shallower recession for Canada vs the US, and the relatively better growth prospect should support the CAD in 2023, says Howard Du, G10 FX Strategist at Bank of America. The CAD was resilient for most of 2022 but sold off after September as investors focused on the imminent rate hike pause from the Bank of Canada (BoC), adds Du. We expect the market to look past the CAD weakness from 2022. The BoC hiked interest rates aggressively in 2022 but expectations of a pause started to build by September, pressuring Canadian bond yields lower which in turn dragged on the Canadian Dollar. The Canadian dollar was resilient for most of 2022. However, it has been selling off aggressively since September, says Yu. Bank of America expects the BoC to be amongst the first of the developed market central banks to pause the tightening cycle. Oil prices - another key driver for the Canadian Dollar - peaked in June and trended lower into year-end, offering another narrative for CAD underperformance in the latter part of 2022. But Bank of America does not expect the slide in oil to extend and this should boost the value of Canada's export basket and underpin foreign exchange earnings. Constructive equity and energy outlooks for 2023 should also support the CAD, says Yu. Above: USD/CAD sensitivity to crude oil is close to zero - Bank of America. Bank of America expects the United States to replenish its strategic petroleum reserves (SPR) from February 2023, which should drive the value of U.S. West Texas Intermediate (WTI) grade oil to $94/barrel. The SPR was emptied in 2022 as President Joe Biden sought to cushion U.S. consumers from a global energy price spike, boosting the supply of high-quality WTI into the U.S. market which suppressed demand for Canadian grades. Our energy outlook would suggest a bullish outlook for CAD with more significant sensitivity to the rising crude oil price in 2023, says Yu. A boost to the country's oil earnings is expected by economists to underpin Canada's economy in 2023
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