Investing.com - Financial Markets Worldwide

No Exit For Now

ByThe National Bank of Canada
Published 11/05/2013, 06:14 AM
Updated 05/14/2017, 06:45 AM

With economic data continuing to disappoint, central banks in the developed world are finding it difficult to exit or even pare back stimulative monetary policies. The tapering of the Fed’s asset purchase program, which until very recently was viewed as imminent, now seems to have been delayed to next year thanks to weak US growth and a deceleration in employment creation. And with economic slack opening up rather than narrowing down in the last couple of quarters, the Bank of Canada finally threw in the towel and abandoned its tightening bias, a feature in its statements for over a year. On the other side of the Atlantic, with credit contraction threatening to derail the recovery, the European Central Bank looks poised to add stimulus rather than withdraw it, more so with inflation continuing to drop. Ditto for the Bank of Japan which has yet to meet its inflation target. We expect Fed tapering to start only in Q1 of next year, something that should allow the US dollar to regain some strength relative to most majors. We have adjusted our near term yuan forecasts to reflect October’s ascent, but have left our other targets largely unchanged.

The Canadian dollar took it on the chin when the Bank of Canada abandoned its tightening bias in October. While the currency should continue to slide towards our end-of-Q1 USDCAD target of 1.06, we remain upbeat about the loonie’s longer term outlook, expecting it to return to stronger than parity with the greenback by the end of 2014.
NBF Currency Outlook
To Read the Entire Report Please Click on the pdf File Below.

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