TORONTO (Reuters), Despite uncertainty surrounding the Omicron COVID-19 variation, analysts are still sticking to bullish Canadian dollar forecasts. Analysts expect oil prices and the Bank of Canada raising interest rates in the near future.
According to Reuters, the average forecast for the Canadian Dollar was 2.4% to 1.25 to USD, or 80 cents per month, compared with 1.24 last month.
In a year, it was expected that the price would rise to 1.23.
Greg Anderson from BMO Capital markets in New York, said “We expect Canada’s Bank of Canada (and the Fed) to increase rates prior to next year.” He also stated that the Bank of Canada and oil prices should rebound from the current level. Both of these are positive factors for the “.
The Bank of Canada, the G7’s first central bank, was the first to end quantitative easing in October. It also indicated that it may raise interest rates starting April. Next week, it will make an interest-rate decision.
According to money market forecasts, the BoC will hike five-fold next year — much more tightening that is observed from the Federal Reserve.
Data this week showed Canada’s economy https://www.reuters.com/world/americas/canadian-economy-posts-annualized-gain-54-q3-october-gdp-seen-up-08-2021-11-30 grew at an annualized rate of 5.4% in the third quarter, beating analyst expectations, and growth most likely accelerated in October on a manufacturing rebound.
Anderson noted that Canada has made a significant progress in recovering from pandemics compared to other OECD nations. Canada will benefit greatly from increased inbound foreign direct investments next year.
Fourth-quarter growth could be affected by recent flooding in British Columbia’s western province.
Moreover, oil prices, which are Canada’s main exports, have fallen around 20% in the past month, driven by increasing coronavirus infections in Europe and detections of Omicron, a potentially vaccine-resistant variant.
Analysts expect that the loonie will be able to handle.
Simon Harvey, Monex Europe’s senior FX market analyst said that markets have learned from past mistakes and will now ignore any serious impact of variants.
We see a rise in global demand and growth, as well as a return to normalization by the hawkish central bank.
(For more stories about the December Reuters foreign currency poll, click here
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