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Canadian Dollar Forecast, November 2021

CANADIAN BANK CURRENCY FORECAST

USD/CAD Forecast
Bank Trend Last Month (October) Q4 2021 (forecast) Q1 2022 (forecast) Q2 2022 (forecast) Q3 2022 (forecast)
CIBC 1.26 1.24 1.28 1.29 1.30
TD 1.26 1.24 1.25 1.26 1.27
BNS 1.26 1.22 1.22 1.22 1.20
RBC 1.26 1.25 1.26 1.27 1.27
BMO 1.26 1.24 1.23 1.22 1.21
Average 1.26 1.24 1.25 1.25 1.25

Summary

The outlook for rising interest rates in 2022 will provide the Dollar with broad support in the coming months. The North American economy is expected to grow faster than its counterparts in Europe and Japan this year and next, which will boost the value of the Dollar. Even though most are bullish on the USD, they are more optimistic about the CAD. The Bank of Canada (BoC) is close to winding down its asset purchase program and suggested that interest rates may rise more rapidly with inflation on the rise. Expect the BoC to raise rates 100 bps from the second half of next year and a further 100 bps in 2023, taking the overnight target rate to 2.25%.

EUR/CAD Forecast
Bank Trend Last Month (October) Q4 2021 (forecast) Q1 2022 (forecast) Q2 2022 (forecast) Q3 2022 (forecast)
CIBC 1.47 1.41 1.45 1.43 1.43
TD 1.47 1.45 1.45 1.47 1.50
BNS 1.47 1.40 1.40 1.39 1.37
RBC 1.47 1.42 1.44 1.44 1.42
BMO 1.47 1.44 1.43 1.42 1.40
Average 1.47 1.42 1.43 1.43 1.42

Summary

EUR's trajectory is likely to be dictated by the ECB meeting on 16 December. The meeting will be accompanied by updated forecasts, including inflation (HICP). Headline inflation is running at levels not seen since 2012 which continues to cause concern for some of the ECB hawks.  While hawks and doves debate the medium-term assumptions, most expect them to maintain bond purchases well beyond the end of next year which is why most expect the EUR to underperform against most counterparts through 2022.

GBP/CAD Forecast
Bank Trend Last Month (October) Q4 2021 (forecast) Q1 2022 (forecast) Q2 2022 (forecast) Q3 2022 (forecast)
CIBC 1.73 1.65 1.70 1.69 1.70
TD 1.73 1.70 1.73 1.75 1.78
BNS 1.73 1.68 1.71 1.71 1.70
RBC 1.73 1.65 1.68 1.68 1.69
BMO 1.73 1.69 1.66 1.65 1.66
Average 1.73 1.67 1.70 1.70 1.71

Summary

A slowing macro environment and relatively contained inflation expectations suggest a less aggressive rate cycle. Rising prices threaten disposable incomes, especially with the already-announced tax hike. The risk of advancing UK/EU trade frictions also points to increased GBP headwinds into early 2022. As a result, most have lowered the GBP’s outlook in 2022.

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