Our analytics team just released a consolidated 2019 bank forecast for the USD/CAD for July 2019 based on numerous reports from the Canadian banks.
Despite the bearish view for the Canadian dollar (a story for 2020) and beyond, the loonie is targeting 1.31 and will quite possibly the psychological 1.30 level in the short term.
USD Foreign Exchange Forecast
With the US economy looking like its slowing down, and with downside risks from tariffs rising, Fed members have started talking about the possibility of cutting interest rates. And with core inflation likely to remain below 2% through the end of the year, there’s scope for them to do so. Assuming no near-term resolution to the US-China trade dispute, analysts have brought forward and added to our previous forecast for Fed rate cuts. We now expect two, in Q4 2019 and Q1 2020.
CAD Foreign Exchange Forecast
While we’re likely to get some better news on the Canadian economy over the remainder of 2019, the BoC is still relying heavily on exports and business investment to drive the economy by 2020. However, continued global trade uncertainties, combined with a temporary appreciation in the C$ as the Fed cuts interest rates, could see the BoC reluctantly join in and reduce rates by 25bp in Q2 2020.