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The U.S. Dollar On A Tear

ByThe National Bank of Canada
Published 06/04/2013, 05:10 AM
Updated 05/14/2017, 06:45 AM

The U.S. dollar has been on a tear in recent months, reaching a two-year high in May. Helping the dollar out is the fact that other major world central banks are also in easing mode. We expect the greenback to extend its winning streak for another few months, as an improving U.S. economy in the second half of the year raises expectations of a wind down of the Fed’s QE program.

The euro has come down as expected to reflect the weak eurozone economic fundamentals. There is room for a further depreciation of the common currency, given that deflationary pressures may force the European Central Bank into delivering more stimulus and move into uncharted waters as rates approach the zero bound.

The Canadian dollar was also taken aback by the U.S. dollar onslaught in May. However, the loonie has fared better than most commodity currencies. The Bank of Canada’s tightening bias likely kept the currency stronger than what would otherwise be the case. But a change of stance from the BoC could come sooner rather than later, coinciding with the changing of the guard at the central bank. In conjunction with rising expectations of a wind down of the Fed’s asset purchase program, it could ensure that C$ weakness extends through the next few months. We’ve accordingly extended the period of C$ weakness through 2014Q1.
NBF Currency Outlook

To Read the Entire Report Please Click on the pdf File Below.

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