Many forecasters seem to be skeptical about the prospect that oil prices are much higher than current levels, which may weaken some of the support for the Canadian dollar. The median forecast for the price of WTI crude oil at the Bloomberg survey is about $63/barrel, which is close to the current level.
“We didn’t see the same momentum from oil prices,”Canadian Imperial Commercial BankBipan Rai, head of North American foreign exchange strategy at CIBC. "So, this raises the question of whether we can rely on the data to be released to really push some support for the Canadian dollar. This is still unknown."
The Canadian dollar rose 2.4% against the US dollar this year, second only to the pound in the G10 currency. The rise in oil prices has provided some support for the Canadian dollar, but the situation in Canada is shrouded in more clouds. Concerns about household debt have risen,House priceIn the fall, economic growth in the second half of 2018 actually fell into stagnation.
Although the January economic growth data is more optimistic and the unemployment rate has remained near the low point of several decades, the Fed has become more cautious. Bank of Canada Governor Stephen Poloz hinted this month thatinterest rateIn terms of policy, he gradually entered a mode of immobility. He said that the global economy is slowing down, plusreal estateThe industry needs longer to adapt to tighter mortgage regulations and higherinterest rateThis means that the economy still needs the help of low borrowing costs.
“Canadians have to worry that there is no other factor in the United States, that is, our family is extremely leveraged,” Rai said. “Given you may see the family deleveraging, the facts may prove that this will be a protracted economic slowdown.”
Rai expects the Canadian dollar to fall to around $1.36 against the dollar by the end of the year and $1.40 in 2020. The US dollar against the Canadian dollar is currently trading near 1.3330.
TorontoTD BankThe Canadian dollar is also under pressure, and currency strategist Mazen Issa not only pointed out the risks of household debt, but also mentionedinternational tradeThe spillover effect that a dispute may have.
"What we basically see is that it is difficult to find the factors that are good for the Canadian dollar as a whole," Issa said. “In fact, the situation may continue to deteriorate.”
However, not all observers are so pessimistic.Bank of MontrealGreg Anderson, global head of foreign exchange strategy, expects the Canadian dollar to rise back to $1.30 before the end of the year,ScotiabankThe exchange rate is expected to rise to 1.27 Canadian dollars.
FengyebankEric Theoret believes that the weak dollar has pushed up commodity prices and boosted Canadian terms of trade. He said that if oil prices continue to rise, the Canadian dollar still has upside.
He said: "If oil prices continue to maintain the current trend, the Bank of Canada should be able to take back some of the loose speeches currently proposed."
Royal Bank of CanadaWealth management companies predict that even if oil prices pick up, the Canadian dollar against the US dollar will remain at current levels until the middle of this year, and will weaken slightly to the range of 1.34-1.36 Canadian dollars by the end of the year.
Laura Cooper, the company's head of foreign exchange solutions and strategy, believes that crude oil's support for the Canadian dollar is limited, as pipeline restrictions help maintain the price difference between Canadian crude oil and US benchmark crude oil prices. She also doubts whether there will be a major shift in the spread, as both the Fed and the Bank of Canada are signaling a prolonged suspension cycle.
She said: "Because of the lack of catalysts from interest rates or commodity prices, we expect the Canadian dollar exchange rate to be roughly flat in the coming months."
(Article source: Gold headline)