Canadian dollar seen up but gains restrained by mortgage resets By Reuters

© Reuters. FILE PHOTO: Financial institution of Canada Governor Mark Carney holds the brand new Canadian 50 greenback invoice, made from polymer, in entrance of the CCGS Amundsen, the Arctic analysis vessel depicted on the again of the brand new invoice, in Quebec Metropolis, March 26, 2012. REUTERS/Mathieu Belange

By Fergal Smith

TORONTO (Reuters) – The Canadian greenback is about to strengthen over the approaching yr if the U.S. Federal Reserve cuts rates of interest as anticipated, however its beneficial properties may very well be held in test as mortgage renewals weigh on family spending and financial progress, a Reuters ballot discovered.

The median forecast of 40 overseas change analysts surveyed within the Feb. 1-6 ballot was for the to strengthen 0.7% to 1.34 per U.S. greenback, or 74.63 U.S. cents, in three months, matching the forecast in January’s ballot.

It was then predicted to advance to 1.30 in a yr, additionally matching the earlier month’s forecast.

The anticipated strengthening comes as some analysts forecast broad-based declines for the U.S. greenback.

The buck is more likely to weaken in 2024 as U.S. financial progress slows to a tempo that’s extra in step with the remainder of the world and the Fed begins slicing charges, mentioned Jayati Bharadwaj, a worldwide FX strategist at TD Securities, including markets might then concentrate on the increase to progress from “world easing cycles.”

Canada is a significant producer of commodities, together with oil, so its economic system may gain advantage from an improved world outlook. Nonetheless, analysts anticipate the tempo of mortgage renewals to carry again its economic system.

Canada’s mortgage cycle is especially quick – the everyday mortgage time period is 5 years or much less, versus 30 in the USA – and plenty of households are more likely to renew at greater charges after borrowing closely at rock-bottom ranges throughout the pandemic.

Upcoming mortgage resets and the Canadian greenback’s decrease sensitivity to strikes within the buck than another Group of Ten (G10) friends might restrain beneficial properties for the foreign money, Bharadwaj mentioned.

“We anticipate CAD to understand on our broad USD outlook however it’s unlikely to be the G10 outperformer,” mentioned Bharadwaj.

(For different tales from the February Reuters overseas change ballot:) (This story has been refiled to take away citation marks within the first clause, in paragraph 5)