Canadian Dollar Outlook Suffers Due To Recession Fears

According to data, the Canadian dollar is not expected to gain as much ground in the coming year as previously expected because the demand for safe-haven currencies like the US dollar has gone up, thanks to the growing risks of a global economic slowdown.

Canadian currency strengthening

The forecast had indicated that there would be a 1.6% rise in the Canadian dollar against the US dollar, which would bring it up to 1.28 in a period of three months. The last month’s forecast had put the Canadian dollar’s value at 1.26 against the greenback. In a year’s time, the Canadian currency had been expected to hit the 1.25 mark, as opposed to the previous 1.23 forecast.

Market analysts said that recession risks have gone up and they are now being priced into markets as well. They said that the US dollar would be in demand because of the risk factor and it was the support for the USD that would contribute to a decline in the Canadian dollar.

Economic concerns

In recent weeks, global economic forecasts have been slashed as supply shortfalls continue to worsen due to the lockdowns in China and the war in Ukraine. This has made it likely that central banks will not stop aggressively hiking interest rates in order to combat inflation.

One of the major Canadian experts, oil has recorded a fall in recent weeks by $25, as it fell below $100 per barrel. Likewise, the Canadian stock market, which is commodity-linked, has also shed 15% of the high it had reached in March.

In comparison, the US dollar seems to be faring a lot better, as the currency climbed to two-decade highs against a basket of its peers, which includes a sharp rise against the euro. Analysts said that the negative ton in regard to risk assets would not change until the central bank decides to shift its policy.

Interest rate

The Bank of Canada is expected to increase its interest rate by a whopping 75 basis points in the coming week and an additional 50 basis points in September as well. Their aim is to take the monetary policy to a place where they would be able to control the economy.

With central banks tightening their monetary policy, yield curves have gotten flat. There has been an inversion in the US Treasury curve, which refers to the difference between 2-year and 10-year Treasury yields. Every time this phenomenon has happened in the past, it has led to a recession in the US.

Almost 75% of Canadian exports are to the United States. Therefore, market analysts said that if an economic recession occurs in the United States and oil prices continue to decline, then this would be bad news for the Canadian dollar. The currency is expected to stay under pressure because of these factors, which means that it would eventually decline. What happens in the US markets will significantly affect the Canadian currency and this is something currency experts are keeping in mind.

Leave a Reply

Your email address will not be published.


Payback Ltd Review – Is It a Legit Scam Recovery Company?

Payback Ltd Rating 4.6 Summary Read our Payback Ltd review at FStar Capital Forex and Cryptocurrency Trading blog, find the answer to your question “is Payback Ltd scam or legit recovery company” and much more! We have checked all the aspects of this recovery firm and we recommend Payback Ltd for fund recovery. You can […]

Bitcoin has rejected $24k for Now While ETH Has Hit a 2-Month High

Bitcoin Could Not Get Past $24k   Bitcoin has reportedly ended the month of July mainly experiencing greens. The price of Bitcoin continued moving in the upward direction.  Since February of 2022, Bitcoin had not been able to climb higher at a significant rate. However, the price of Bitcoin had finally started showing signs of retracement […]

Disappointing GDP Results Cause Philippine Peso to Slip

On Tuesday, the trading price of the Philippine peso fell tremendously. Its value ended up experiencing the worst downward movement compared to the rest of the fiat currencies on Tuesday. The reason why the Philippine peso performed worse than its Asian peers was due to below-expectation GDP growth. Philippine’s GP growth was not as much […]

EUR Has Gained Momentum Against USD And It Is Currently At A Higher Ground

The trading price of the EUR/USD pair has improved tremendously in recent trading sessions. The data suggests that it is currently trading near the 1.0200 benchmarks. Euro Gains Momentum after Posting Eurozone Sentix Data The data surrounding the Eurozone Sentix was recently posted, showing that it has improved in the month of August. A downtrend […]

Optimism (OP) Rallied by Almost 300% in 30-Days, Will its Rally Sustain?

The trading value of Optimism (OP) has been undergoing significant growth in the past 30-days. Since the start of July, the trading value of Optimism has continued surging, which is due to its connection with Ethereum. Almost 300% Rally Recorded by Optimism The trading price of Optimism has experienced an almost 300% rally in the […]