The Real Economy Blog

Economic News from RSM

Home > Economics > Market Minute: Rate expectations to weigh on the loonie vs. greenback

Market Minute: Rate expectations to weigh on the loonie vs. greenback

by

The U.S. dollar has rallied against a broad basket of currencies as global investors move into dollar-denominated assets in pursuit of higher returns and as the questionable notion of de-dollarization runs its course.

A look at the Canadian dollar illustrates how growth differentials and diverging rate expectations have driven a wedge between the greenback and the loonie since July.

Get Joe Brusuelas’s Market Minute economic commentary every morning. Subscribe now.

The Bank of Canada, facing soft economic growth, will most likely cut rates in the coming months as Canada prepares to enter into the renegotiation of the USMCA next year.

In addition, sustained trade uncertainty and a global glut of oil will further dampen demand for the loonie compared with the greenback in the coming year, which is why we have a modestly bearish bias on the Canadian dollar.

We expect the divergence in growth prospects and central bank policy rates to continue into next year with the CAD falling to 1.34 against the USD, which is modestly below the forward rate of 1.38.

Related posts

About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

The Real Economy Blog