April 25, 2024

Canadian Dollar to Strengthen with Aggressive Rate Hikes

In the coming year, the Canadian dollar is expected to see an increase in value, as the country’s economic outlook will receive a boost due to high prices of commodities. Moreover, the fact that the Bank of Canada (BoC) will continue to aggressive hike up the interest rates is also a positive sign. It should be noted that remains the only G10 currency that has managed to keep up with the US dollar in 2022, which is considered a safe haven. The poll’s median forecast indicated that there would be a 0.4% increase in the Canadian dollar’s value against the dollar, which would bring it to 1.26.

This increase is expected in the next three months, whereas last month’s forecast had shown that the value was expected to be 1.2568. It had then been expected to increase to 1.23 in about a year. Currency strategists said that for the medium-term, it was good to stay positive about the CAD. This was because it was apparent that the Bank of Canada is being very proactive when it comes to monetary policy tightening. They are expected to remain a great deal more aggressive than the US Federal Reserve in the coming six months or so.

On Wednesday, the Bank of Canada had given hints about a more aggressive increase in the interest rates, as it asserted that it was ready to take action ‘more forcefully’ in order to control inflation. The benchmark interest rate climbed to 1.50% after the BoC increased the rate by a half percentage point for the second time in a row. According to money markets, this rate is expected to hit 3% by the end of the year. Some analysts have stated that higher interest rates are going to impact the Canadian economy.

This was because people had wanted a piece of the housing market that had turned red-hot during the coronavirus pandemic and in order to do so, they had borrowed funds heavily. Property experts have predicted that the housing boom will come to an end in 2023. Nonetheless, the first quarter saw the gross domestic product of Canada grow by about 3.1%, as it received a boost from high demand domestically. In contrast, the United States had seen a contraction. Strategists also believe that the Canadian economy is performing well in terms of trade and commodity. The ratio between prices of export and import is called terms of trade.

If it improves, the country’s wealth goes up. The start of 2022 has seen an almost 50% increase in the price of oil, which is one of the major exports of Canada. This is because Russian supplies have been disrupted due to the sanctions imposed on the country by Western nations. In February, Russia invaded Ukraine and this drew the ire of a number of Western countries. In light of the military action, countries have imposed sanctions on the Russian Federation, which has resulted in skyrocketing prices of oil all over the world.

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous post Is Cardano’s Recent Rally a Strong Positive Movement or is it a Bull Trap
Next post Russian State Depository Decides to Stop Operations in Euros after EU Sanctions