Consensus Canadian Dollar Forecast

July 23, 2021 | About

Long Term

1.268

Short Term

1.257

Today's expected range

USD to CAD: Current Price & Daily Updates

Value of USD in Canadian Dollars

  • USD to CAD Update: CAD set to end the week higher after a roller coaster week July 23, 2021
    The Canadian dollar is set to end the week about half a penny above where it started but only after a roller-coaster week in which currencies bounced around on shifting risk appetites and volatile oil prices.  The loonie approached new lows for 2021 on Monday when worries about Covid variants and a big drop in oil prices had investors moving into USD.  By Wednesday, variant worries had receded in the face of strong corporate earnings and oil recovered most of its losses.  In turn, CAD spiked to just above where it had started on Monday.  We have basically  held there since then and USD to CAD is currently at 1.258 (CAD to USD is at 0.795).  Next week could be volatile again as it brings a slew of economic data that could move the market.  Most importantly, we get the Fed statement on Wednesday which will give us further guidance on US monetary policy.  On that same day, in Canada, we get a highly anticipated June inflation report.

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Views on USD to CAD

The defining social and economic event of the last year and a half has been the COVID-19 pandemic. The risk of the virus is now receding in Canada, though it remains a potent challenge in much of the rest of the world. Similarly, the economic recovery in Canada and the US is quite advanced while it remains at various stages in other parts of the world. Here is what is now driving the value of the Canadian dollar.

  • The shape of the recovery. Early on in the pandemic, the debate was about the shape of the recovery; will it be a V-shaped or U-shaped recovery? That question has been definitively answered. In almost all measures of economic activity, we are approaching, or are already, above pre-pandemic levels. Indeed, we have exceeded the most optimistic scenarios for economic recovery and the “reflation trade” has been a key theme to the financial markets for the last several months. What remains to be seen now is whether the acceleration of economic activity will continue or whether we are in for a long slog for the last mile of recovery. The more robust the economic recovery the higher the Canadian dollar.
  • Inflation. Inflationary pressures have surfaced on both sides of the border in the last few months. So far, central banks have generally dismissed inflation as transitory and not a reason to pull back on stimulus sooner-than-expected. But inflation figures have consistently surprised to the upside and proven more persistent than some anticipated. Given Canada’s open economy, US inflation will invariably be imported into Canada. Generally, a more inflationary environment will mean a lower the Canadian dollar.
  • Fiscal and monetary stimulus. Central banks and governments around the world have already started pulling back on the huge monetary and fiscal stimulus which was designed to address the economic stoppages resulting from the pandemic. The Bank of Canada and the Government of Canada were amongst the most aggressive in their stimulus programs. The Bank of Canada has also been the most aggressive in pulling back its stimulus programs and projecting rate hikes in 2022. In fact, the Bank of Canada’s surprise hawkishness caused a two month rally in the loonie which only came to a stop when the US Federal Reserve also began signaling its own tapering. The more quickly the Bank of Canada moves to rein stimulus the higher the Canadian dollar. Conversely, the more the Fed signals an end to QE, the more the Canadian dollar will decline against USD. The end of fiscal stimulus in the form of programs like CERB and CEWS and CERS will have a huge impact on the Canadian economy and an unknown impact on the exchange rate.
  • The variants. Covid has been more persistent and more deadly than anyone expected. How the vaccination efforts proceed around the world and how Covid variants spread amongst the vaccinated and unvaccinated population will have much to say about economic activity. The higher the potency of the variants and the greater the risk they pose to economic activity, the greater appetite will be for risk havens like the US dollar and therefore the lower the Canadian dollar.
  • Geopolitics. Geopolitical developments have always impacted the USD to CAD exchange rate. But they are especially important now that the world is emerging from the pandemic into an unknow global environment. US/China tensions not only persist but are growing. Geopolitical tensions that disrupt global trade will generally be bearish for the Canadian dollar, though those that raise the price of oil will be bullish for the Canadian dollar.
  • The price of oil. Oil prices have rebounded to well past pre-pandemic levels and are once again a key factor driving the Canadian dollar. The correlation between oil prices and the Canadian dollar has also returned to pre-pandemic levels. The higher oil prices, the higher the Canadian dollar.
Canadian Dollar Forecast

USD to CAD Daily Updates

Daily Updates
July 23, 2021

USD to CAD Update: CAD set to end the week higher after a roller coaster week

The Canadian dollar is set to end the week about half a penny above where it started but only after a roller-coaster week in which currencies bounced around on shifting…
Daily Updates
July 22, 2021

USD to CAD Update: US dollar declines for third day in a row

The US dollar dropped further this morning after weekly jobless claims unexpectedly moved higher raising some doubt about a strong U.S. labor market recovery in the fall.  The drop comes…
Daily Updates
July 21, 2021

USD to CAD Update: Canadian dollar rebounds as sentiment turns positive

It is only Wednesday morning and it has already been a whirlwind week for the Canadian dollar.  Monday saw stocks sell off very heavily on concerns about the spread of…
Views
November 19, 2020

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The IFC Consensus Canadian Dollar Forecast is based on the aggregation of forecasts by major Canadian and Global banks and trading houses. The methodology used to calculate the forecast takes into account, among other things, the historical accuracy of the forecaster as well as other factors deemed relevant. Short Term refers to forecast for the end of the current quarter. Long Term refers to the forecast for the end of next year. The IFC Canadian Dollar Consensus Forecast is updated periodically.

The contents of this site are for information purposes only, and represent the personal views of the authors. It is not intended in any way as a recommendation to trade, nor does it construe advice whether to buy or sell. No responsibility can be held arising from any loss following consideration of this information. For information specific to your situation you should consult your relevant advisor or investment, legal or accounting professionals. All exchange rate figures displayed on this website are based on interbank exchange rates. These are not trading levels and are for indicative purposes only. Information provided is believed to be reliable when posted. Interchange Financial Corporation (“IFC”) does not guarantee its accuracy and information may change without prior notice. IFC is not responsible in any manner for direct, indirect, special or consequential damages however caused, arising out of the use of this web site.