The latest monthly Reuters poll of currency analysts indicates that they expect the Canadian dollar to weaken by a full penny or to 1.35 per United States dollar in the next three months but to rebound and reach 1.30 per US dollar in a year’s time. The big underlying assumption is that there are no further global economic shocks, and the Canadian economy experiences a ‘soft landing.’ A soft landing refers to a situation where an economy moves from a period of high growth to a period of slower growth or stability without experiencing a severe recession or economic downturn.
We generally agree with the outlook that the Canadian dollar will strengthen against the US dollar in the long term but are not convinced that the soft landing is a given. Especially when you consider that the full effects of the historic rate tightening cycles in both the US and Canada have not yet completely played out. Add to that the fact that the latest round of economic news on both sides of the border has been very soft, with the US Job Openings and Labor Turnover Survey showing demand for workers declining more than expected and Canada’s trade surplus narrowing noticeably.
The Canadian Dollar is currently trading at 1.3455 against the US dollar.
