Analysts stick to bullish Canadian dollar forecasts, eye soft economic landing

© Reuters. FILE PHOTO: A Canadian greenback coin, generally often known as the “Loonie”, is pictured on this illustration image taken in Toronto, January 23, 2015. REUTERS/Mark Blinch/File Photograph

By Fergal Smith

TORONTO (Reuters) – The Canadian greenback is about to strengthen over the approaching 12 months if the Federal Reserve shifts to slicing rates of interest as anticipated and the U.S. economic system slows with out slipping into recession, a Reuters ballot discovered.

Within the March 1-6 ballot of 40 overseas trade analysts the median forecast was for the to strengthen 1.4% to 1.34 per U.S. greenback, or 74.63 U.S. cents, in three months, matching the forecast in February’s ballot.

It was then predicted to advance to 1.30 in a 12 months, additionally matching the earlier month’s forecast. The anticipated strengthening comes as some analysts forecast broad-based declines for the U.S. greenback.

“The gradual decline in USD-CAD actually partially displays a slowing U.S. economic system and the Fed embarking on a price slicing cycle,” stated Derek Halpenny, head of analysis, international markets EMEA and worldwide securities at MUFG.

“We additionally assume no arduous touchdown (for the economic system) and if threat stays broadly beneficial this 12 months that must also profit CAD.”

Canada is a significant exporter of commodities, together with oil, so the loonie tends to be delicate to swings in investor sentiment.

Nonetheless, roughly 75% of Canada’s exports go to the US so slower U.S. development will not be a recipe for Canadian greenback power towards Group of Ten currencies apart from the dollar, say analysts.

“A slowing economic system within the U.S. and a weakening U.S. greenback tends to lead to CAD underperformance vs different G10 currencies,” Halpenny stated.

The Financial institution of Canada can be anticipated to start a price slicing marketing campaign this 12 months because the economic system slows and inflation cools.

Analysts count on the Canadian central financial institution to go away its benchmark rate of interest on maintain at a 22-year excessive of 5% on Wednesday and on the following coverage determination in April however to then begin slicing in June, a latest Reuters ballot confirmed.

(For different tales from the March Reuters overseas trade ballot:)