Currency Exchange Rates Us Canada

Currency Exchange Rates Us Canada – The Canadian dollar has been in freefall recently, falling as low as USD 0.73. The last time the Canadian dollar was weak was two and a half years ago at the start of the pandemic. A lower Canadian dollar relative to the US dollar supports exports and imports, which can be good news in the current economic climate.

The exchange rate between the Canadian dollar and any foreign currency floating is a force of supply and demand. The currency market, like all other markets, reflects expectations for future development. And like other markets, like the stock market, it is volatile and difficult to predict.

Currency Exchange Rates Us Canada

However, some indicators such as share prices, the difference between Canada and the US, short-term interest rates and the level of the stock market can give us an idea of ​​where the value of the loonie is going. ‘in the weeks ahead.

Ratio Of Purchasing Power Parity To Actual Exchange Rates For Selected…

The infrastructure industry accounts for about 10% of Canada’s economy, but about 40% of exports. The Canadian stock market is also heavily weighted towards commodity producers. Therefore, the volatility in global prices for commodities such as oil, metals and grains traded in US dollars explains some of the volatility in Canada/US. exchange rate.

Commodity prices have fallen in recent months on the back of slowing economic growth. Central banks around the world are raising interest rates to combat rising prices, fueling fears that the slowdown could turn into a global recession, eroding demand for commodities. The shock in commodity prices caused by the invasion of Ukraine and the sanctions imposed on Russia, both major exporters of goods, is also abating.

Energy prices (including oil) are down nearly 30% from mid-June peaks as fears of a recession mount. However, lumber prices have halved in the past six months as rising interest rates affect the property market.

Although the problem of supply shortages remains, the correction in commodity prices is expected to continue in the coming months and weaken the Canadian dollar against its US counterpart.

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Short-term interest rates between Canada and the US were hurt by central bank actions in the early stages of the pandemic. To support the economy, both the US Federal Reserve and the Bank of Canada lowered their key interest rates to the ground and used massive purchases to support low interest rates.

Today it is a completely different story. Although the numbers on both sides of the border are rising in tandem, the expectations of where they will be high are very different. The latest Canadian inflation data shows encouraging signs that the worst may be behind us; this was not the case in the US where the core inflation index rose in August.

Therefore, the Fed will raise its policy rate to close to 5% in 2023 while we expect the Bank of Canada’s policy rate to rise to around 4%.

The widening spread between short-term rates between the US and Canada is supporting the US dollar as investors move money for higher profits south of the border. This is another factor that will weigh on the Canadian economy in the coming months.

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Volatility in the stock market is an indicator of risk appetite, global uncertainty and inflation expectations. The VIX, an index that represents volatility in the stock market – often referred to as volatility – has been high for several months.

The war in Ukraine, the energy crisis in Europe, the severe covid-19 shutdown in China and the dispute over Taiwan contribute to growing uncertainty. The fear of a global recession also causes volatile expectations in the stock market.

In this case, the demand for the US dollar as a reserve currency increases. The dollar has strengthened significantly, not only against the Canadian dollar, but also against all major currencies in the world in recent weeks.

Of course, relative to other currencies, the Canadian dollar has done well. It is down 8% against the US dollar since the start of the year, less than a 15% drop in the euro and a 20% drop in the Japanese yen and British pound.

Infographic: A Snapshot Of The World Economy In September 2021

The lonnie continues to lose ground as many commodities, including oil, fall in price. Fears of a global recession are increasing and the Fed will raise interest rates higher than the Bank of Canada to curb inflation.

All of these forces will continue to pound the Canadian dollar in the coming months and support the US dollar. The exchange rate should continue to rise to USD 0.70-0.75 for some time. A weaker loonie supports Canadian exports at the expense of imports. This should slow the economic slowdown in Canada a bit, but it will likely be limited because the US economy is also slowing down.

As we enter the final quarter of the year, the challenges facing the Canadian economy continue. Growth will become harder to achieve as interest rate hikes begin to discriminate against the economy. Still, Canada seemed to hold up well in the third quarter. Statistics Canada’s preliminary forecast indicates no growth in August. It may seem disappointing, but if approved, it will be a commendable achievement compared to the struggles of other major economies.

In July, GDP growth was expected to be higher (+0.1% compared to June). So the economy could produce real annual GDP growth of less than 1% in the third quarter.

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Economic growth depends primarily on household consumption. In today’s environment, rising prices and rising interest rates reduce consumers’ purchasing power. In fact, the high level of household debt in Canada makes the country’s economy more sensitive to interest rate increases than, say, the United States. Also, Canadians experienced the largest drop in household wealth on record in the second quarter. It fell by nearly $1 trillion, reflecting big falls in the stock, bond and real estate markets.

This reduction can weigh heavily on consumption because people spend less when wealth declines. This is especially true when consumers worry about the future and are cautious about making sensible purchases.

Canadian household debt to disposable income reached 181.7% in the second quarter, two percentage points higher than in the first quarter. This includes borrowing more money during that period. However, high interest rate increases in the third quarter and those expected for the rest of the year should reduce the pace of lending.

The economy is not looking good, but at least there is some good news on the price front. The consumer price index fell 0.3% in August from the reading in July and was still below June’s level.

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Selling prices will probably rise in June, and fall from 8.1% to 7.0% in August. The most reassuring part of the August report was the first drop in the inflation rate since the economy reopened from the covid lockdown, a sign that tight monetary policy is having the desired effect.

Although this year’s interest rate (+ 300 basis points) is finally starting to show a reduction in inflation, the Bank of Canada is still expected to raise the key rate again on October 26.

In other good news, the unemployment rate fell by 5.2% in September, as total employment was little changed (+21,000 new jobs).

Despite job losses in recent months, which now amount to 92,000 since May, the labor market remains stable. In July, the number of vacancies falls below 1 million. Retirement rates are still high in September and students return to school.

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Average income continues to rise with a change of 5.2% per year, which should offset the negative effects of economic losses and increases in consumption.

Since the organization mandated defining the US trading system legally, the US is not in recession. While it’s not all doom and gloom, the economic outlook across the border is worrisome and a sharp decline in our customer base will hurt the Canadian economy.

By general definition—two steps of negative gross domestic product (GDP) growth—the United States entered recession in 2022. The Center for Economic Research in the United States, like Canada’s C.D. Howe Institute, defines a recession as a sharp, permanent decline in the expansion of economic activity. This is also an explanation supported by economists.

Regardless of the explanation you use to explain what is happening now in the US, third-party data will be important to faith in the economy.

Infographic: How Currency Fluctuations Impact Canadian Investors

Many indicators, including GDP growth, point to an economic slowdown. Still, the economy added 263,000 jobs in September, bringing the total for the year to 3.8 million. Unemployment fell to 3.5 percent. Can we talk about a recession without massive job losses?

Still facing high inflation and the tightening of US monetary policy, consumers and investors remain depressed despite the strength of the labor market. However, the latest estimate from the Atlanta Federal Reserve Bank’s GDPNow model for real GDP growth in the third quarter of 2022 is 2.7%.

If the proposal is approved and if the sale price is high, we can see a new optimism among the American people that will happen

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