Richter survey of bank forecasts: Foreign exchange and interest rates

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Currency environment remains volatile, spread widens on reported maturities

The Canadian dollar (CAD) rallied against the U.S. Dollar (USD) to reach a five month daily peak of 0.84 USD/CAD by mid-May before reverting sharply to just under 0.80 USD/CAD by month’s end. In comparison to last month, the published outlooks by the Canadian banks indicate a less bearish view on the value of CAD relative to the USD by the end of 2016. Specifically, RBC, CIBC, Scotiabank and BMO revised upwards their respective outlooks, whilst TD and National Bank kept their 2016 year-end currency forecasts intact. In general, despite these revisions, the outlook remains a volatile one, as the values for the USD/CAD currency pair as forecasted by the Canadian banks range from 0.75 to 0.85 over this reported period.

Over the month of May, Canadian government bond yields declined, whilst the 2, 10 and 30 year Treasury yields rose, effectively widening the spread on all reported maturities. Despite this recent divergence of yields on presented maturities, there have been no changes to the short-term forecasts of the Canadian overnight rate and the US Federal Funds Rate amongst the surveyed banks since last reporting. The consensus remains that the overnight rate shall be kept at 0.75%, whereas the effective Federal Funds Rate shall rise and range between 0.71% and 1.00% through the end of the first quarter of 2016.

Bank Forecasts Chart 1 June 2015 

Bank Forecasts Chart 2 June 2015

 Bank Forecasts Chart 3 June 2015

Bank Forecasts Chart 4 June 2015


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