Richter survey of bank forecasts: Foreign exchange and interest rates

September 2015

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Loonie shows resilience, outlook remains muted

The USD/CAD currency pair traded within a modest range throughout the month of August, opening the month at slightly above 0.76 USD/CAD and closing the month at just under this mark. The bank forecasts reveal that a consensus exists that the CAD shall modestly depreciate relative to the USD for the remainder of 2015.

Although the forecasts indicate that a floor may have been reached, the longer term outlook remains muted for the CAD as all bank forecasts indicate that an 80 cent loonie is not within reach through 2016. This represents a significant downward revision in the collective outlook relative to the July publication, where RBC was the sole entity forecasting the CAD to demand less than 0.80 USD by the end of 2016.

CAD/EUR volatile throughout August, outlook uncertain

The currency pair traded in a wide range through the month of August, between 1.43 and 1.53 CAD/EUR before eventually settling on 1.48 CAD/EUR at month end. The future value of the currency pair is uncertain so far as the banks’ forecasts are concerned. CIBC remains on one end of the spectrum, predicting the EUR to demand as much as 1.54 CAD. BMO, despite having revised its 2016 year-end estimate from 1.26 to 1.32 CAD/EUR since last reporting, remains on the other end.

Bank of Canada maintains overnight rate at 0.50%, series of hikes expected in the U.S

With the exception of National Bank, the surveyed banks do not forecast any further cuts to the overnight rate through 2016. The National Bank forecast was published prior to Bank of Canada’s September announcement that the overnight rate will remain steady at 0.50%. In the U.S., all reporting banks anticipate several Fed rate hikes through 2016, with RBC leading the pack.

Forecasted yields on 2 year bonds largely unchanged

The consensus remains that the 2 year government bond yields will rise in both Canada and the U.S. through 2016.

10 year government bond yields expected to rise through 2016

The reporting banks maintain their forecasts that the 10 year government bond yields will rise steadily through 2015 and 2016 in both Canada and the U.S., with RBC predicting the steepest increase on both sides.

RBC optimistic on rising long bond yields in Canada and the U.S.

A consensus exists that long bond yields will rise in Canada and the U.S. through 2016. RBC continues to anticipate the steepest increases to long bond yields, well ahead of its peers.

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Our commitment to excellence, our in-depth understanding of financial issues and our practical problem-solving methods have positioned us as one of the most important independent accounting, organizational advisory and consulting firms in the country. Richter has offices in both Toronto and Montreal.

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