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Canadian Dollar Forecast, January 2023

CANADIAN BANK CURRENCY FORECAST

USD/CAD Outlook

After outperforming for most of 2022, the Canadian economy has hit a downdraft and momentum is fading. Both business and households are facing mounting bills due to inflation and rising credit costs. With mortgage payments resetting at rates some 2-to-3 percentage points higher than at origination, indebted households will need to cut spending by thousands of dollars each year. On the global front, lower commodity prices and lower global demand are hurting the Canadian exporters. The Canadian economy is likely to contract in 2023 as fundamental challenges lie ahead for both households and businesses. The trading range for the USD/CAD is 1.3350- 1.3650.

US Dollar / Canadian Dollar Forecasts - Jan 2023

Bank Trend Jan 24, 2023 (Spot) Q1 2023 (forecast) Q2 2023 (forecast) Q3 2023 (forecast) Q4 2023 (forecast)
DESJARDINS 1.34 1.39 1.39 1.37 1.35
CIBC 1.34 1.34 1.32 1.32 1.31
TD 1.34 1.37 1.39 1.37 1.37
BMO 1.34 1.35 1.33 1.32 1.30
RBC 1.34 1.37 1.38 1.37 1.36
Average 1.34 1.36 1.36 1.35 1.34

EUR/CAD Outlook

The combination of a warmer-than-expected winter and better-than-expected economic data have seen market participants reassess their pessimistic outlook toward the eurozone.  The prospect of a more aggressive European Central Bank helped lift the euro to new six-month highs. As a result, investors have flocked back to the euro area. Euro stock markets have also extended gains and are now up more than 6% this year compared to a 13% drop last year. It will be interesting to see if the euro can continue to post solid gains over the medium term. The trading range for EUR/CAD is 1.44-1.47.

Euro / Canadian Dollar Forecasts - Jan 2023

Bank Trend Jan 24, 2023 (Spot) Q1 2023 (forecast) Q2 2023 (forecast) Q3 2023 (forecast) Q4 2023 (forecast)
DESJARDINS 1.45 1.42 1.43 1.44 1.44
CIBC 1.45 1.43 1.45 1.47 1.48
TD 1.45 1.39 1.38 1.38 1.39
BMO 1.45 1.44 1.44 1.44 1.44
RBC 1.45 1.45 1.44 1.40 1.36
Average 1.45 1.43 1.43 1.42 1.42

GBP/CAD Outlook

The GBP has been a G10 outperformer as well this year.  Better than expected economic data has seen investors pile into the UK with similar vigor to that of the eurozone. The UK stock market is up 4.3 % this year after falling 2.7% in 2022.  The GBP will likely continue its upward trajectory as US dollar continues to fall out of favor. The trading range for GBP/CAD is 1.63 -1.67.

British Pound / Canadian Dollar Forecasts - Jan 2023

Bank Trend Jan 24, 2023 (Spot) Q1 2023 (forecast) Q2 2023 (forecast) Q3 2023 (forecast) Q4 2023 (forecast)
DESJARDINS 1.65 1.63 1.63 1.63 1.65
CIBC 1.65 1.62 1.64 1.64 1.65
TD 1.65 1.62 1.60 1.60 1.61
BMO 1.65 1.66 1.65 1.65 1.65
RBC 1.65 1.67 1.63 1.57 1.51
Average 1.65 1.64 1.63 1.62 1.61

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