The Canadian dollar certainly suffered from the negative GDP and the downward revision to job numbers. Can it recover? Probably not, says the team at CIBC think not.
And what about the British pound? The fall in rate hike expectations could also weigh.
Here is their view, courtesy of eFXnews:
The following are the weekly outlooks for the CAD, and GBP as provided by CIBC World Markets.
CAD: Battered Loonie. In cutting rates, the Bank of Canada is eyeing what will be a dramatic decline in energy investment. The Canadian Association of Petroleum Producers estimates that spending plans in Western Canada’s energy sector are likely to fall by a third.
In addition to hamstringing capital expenditure and hiring, and in the process encouraging the Bank of Canada to cut rates, lower crude prices will also severely damage Canada’s external position. The goods trade balance is moving deeper into the red; oil’s move will likely create around a $1 bn hit in December alone. With more pain ahead, look for the loonie to continue taking it on the chin.
GBP: Pounding Down Rate Hike Expectations. The fall in inflation recently has led the two dissenting MPC members to drop their earlier call for a rate hike, and seen financial markets dramatically push back expectations for BoE policy normalization. However, unlike in the US, wages, which can often be an indicator of future acceleration, are starting to firm again following a soft patch from late 2013 to mid-2014.
So don’t be surprised if the BoE do still start raising rates this year, albeit later than the Fed, which would see sterling claw back some lost ground against the US$ in the second half of the year.
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