Canadian Dollar Forecast, September 2023

USD/CAD Outlook

The US dollar's current eight-week winning streak, the longest in nine years, is driven by the strong performance of the United States compared to Europe, Japan, and China. Economic challenges in China and Europe are likely to lead global investors to favor US treasuries, bolstering the US dollar.

The Canadian dollar's struggle against the US dollar can be attributed to the economic divergence between the two economies. Firstly, Canadian borrowers are more vulnerable to higher interest rates due to their elevated debt levels and shorter-term mortgages, setting them apart from their American counterparts. Secondly, US households are more inclined to spend their excess savings, likely because they carry lower levels of debt. Thirdly, Canada's labor productivity is on the decline, in contrast to the United States, which is experiencing an upturn. Additionally, there's a widespread belief that the Bank of Canada has completed its interest rate hikes. If oil prices decline or Canadian economic data continues to underperform, the Canadian dollar may weaken further, potentially reaching 1.38 against the US dollar. 
 

US Dollar / Canadian Dollar Forecasts - September 2023

EUR/CAD Outlook

After reaching its peak for the year on July 16, the Euro has faced eight consecutive weeks of decline. This downward trend is supported by evidence of weakening real economic activity and survey data, notably the shift from manufacturing to services in the PMI indices. These developments pose a growing challenge for the central bank, which now relies heavily on data-driven decisions. Furthermore, the most recent ECB bank lending survey reveals a significant slowdown in both corporate and household borrowing compared to the previous year, up until mid-year. These expanding fault lines in the Eurozone's economic landscape underscore the increasingly complex policy situation for a central bank that has shifted from a protracted period of policy autopilot to a more data-dependent approach. The expected EUR/CAD trading range is 1.4450-1.4750.

Euro / Canadian Dollar Forecasts - September 2023

GBP/CAD Outlook

Bank of England officials hold the view that the UK's inflationary pressures are likely to endure longer than the time it took for these pressures to initially emerge. This perspective underpins the Bank of England's commitment to maintaining a restrictive policy stance for an extended duration. There has been a discernible moderation in forward-looking survey data, with a notable example being the services PMI. The expected GBP/CAD trading range is 1.6650-1.7150. 
 

British Pound / Canadian Dollar Forecasts - September 2023