Canada

Canadian dollar forecasts shift higher as commodity markets rally

As Canada’s economy reopened in recent months and coronavirus infections declined, domestic data showed manufacturing activity expanding and the housing market recovering. Nearly a million jobs were added in June, and data due on Friday may show the economy added more jobs in July.

Ottawa is rolling out more than C$300 billion of economic support, about 15% of gross domestic product, and the Bank of Canada has cut interest rates to near zero and begun its first large-scale asset-purchase program. Its balance sheet as a share of GDP has expanded this year by more than some major counterparts, including the U.S. Federal Reserve.

Rising forecasts for the loonie come as the U.S. dollar weakens and commodities rally. Gold rose to a record high above $2,000 an ounce this week and oil traded on Wednesday at its highest since early March. Canada is a major producer of commodities.

“We think there is further upside for the loonie ahead given the potential for oil prices to rise further,” said Stephen Brown, senior Canada economist at Capital Economics. It sees the loonie at $1.29 in 12 months.

(For other stories from the August Reuters foreign exchange poll:)

(Reporting by Fergal Smith; Polling by Sarmista Sen and Khushboo Mittal)

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