Home pages - full list (A-Z)

Canadian Dollar Still Friendless After GDP; Fair Value Much Lower

After a friendless Friday, the Canadian dollar has continued to lose value at the start of the new week. Now worth C$1.332 per USD, the loonie is at a 12-day low, but it has far further to fall if CIBC’s fair value estimation of C$1.4 is anything to go by.

Email share     Facebook     LinkedIn    Twitter

In the past 28 trading hours, spanning Friday and Monday, the Canadian dollar has lost the best part of 2 cents against the US dollar. Monday’s USD/CAD rate of C$1.332 marks the loonie’s weakest level in 12 days.

Other notable exchange rates include GBP/CAD, which spent Monday morning trading at levels in excess of C$1.76—the Canadian dollar’s lowest level against the pound since last June.

Following Friday’s dismal Canadian GDP data, which showed the economy contracting in December and growing at its slowest quarterly pace in 2 ½ years, traders now have sufficient incentive to adjust their currency positions to reflect a lower likelihood of future interest rate hikes by the Bank of Canada.

USD to CAD - 1 Week chart - Latest
USD/CAD - 1 Week Chart - Latest

In a note on the Canadian economy, CIBC Capital Markets’ chief economist Avery Shenfeld wrote: “If not for a huge employment gain in January we’d be worried about an outright recession.”

Moreover, the weak GDP reading now makes Wednesday’s Bank of Canada meeting “of interest only to the extent that Governor Poloz pulls further back from his talk about normalizing rates towards 3 percent.”

Shenfeld offered a simple conclusion: “Negative for the Canadian dollar!”

As for targets for currency depreciation, readers can look to yet more opinion from CIBC, this time from CIBC Research.

“Since the financial crisis, the Canadian dollar has been trading stronger than our econometric model would have implied using commodity prices and interest rate spreads. One factor not captured in that model was the greater attractiveness of Canadian securities to international investors. However, last year saw the smallest net inflow into Canadian securities in a decade. As such, there’s a clearer path for USD/CAD to reach something closer to its modelled fair value, which is around C$1.40.”

A move to C$1.40 to the US dollar would take the loonie to its lowest level since early 2016.


Further Reading


Aussie Dollar Might Reach 10-Year Low of 65¢ After Decline Accelerates

The Australian dollar is now worth only 68.6¢ after another week of heavy losses, and now one senior analyst has predicted exchange rates in the “mid-60s” this year – rates not seen since 2009.

Posted: 18 May, 2019

Banks Fined €1.1 Billion for Currency Manipulation

Five banks have been fined a collective €1.07 billion by the European Commission for running a “cartel” that manipulated foreign exchange rates for financial gain.

Posted: 16 May, 2019

Sterling in Trouble: Eighth Day of Losses Takes GBP to 3-Month Low

The British pound fell on Wednesday towards a 3-month low against the euro and US dollar as attention turned back to Brexit and after lower-than-expected wage growth lessened prospects for a Bank of England rate hike.

Last update: 15 May, 2019


Tags: News , , , ,

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.

Get a Better FX Deal when you Send and Spend Abroad.


Do NOT follow this link or you will be banned from the site!