05.06.202009:37 Forex Analysis & Reviews: Canadian dollar: hope for revival persists

By the end of this week, the scales of the canadian dollar tipped towards the downside. The CAD has been in a downward trend for a long time, and even the Bank of Canada's meeting held in the middle of the week could not turn the situation around. Thus, experts believe that we should not expect active growth from the "loonie" in the near future.

Despite some disappointment from the inability to enter an upward trend, the Canadian dollar hopes for further strengthening continues. They mainly concern the medium and long term. Analysys say that the Canadian currency paired with the US currency has strengthened by 500 points over the past two weeks.

Before the meeting of the Canadian regulator, which was held on Wednesday, June 3, the USD/CAD pair quickly jumped by almost 100 points against the background of rumors about the possible introduction of negative interest rates. It can be noted that negative rates have been an obstruction recently for most central banks. The Bank of Canada did not escape this fate.

However, the situation in Canada's economy turned out to be more favorable than was required to enter such rates. It can be recalled that such measures are resorted to only in the case of an active increase in the economic crisis. Of course, the Canadian economy and national currency have been severely affected by the effects of the pandemic COVID-19, but not to the extent that they introduce negative rates. Moreover, none of the representatives of the regulator gave rise to the implementation of such a tough scenario.

Nevertheless, the results of the meeting of the Bank of Canada did not cause any panic in the markets, since they were within the framework of previous forecasts. The regulator kept the rate at the current level of 0.25% and expressed hope for a further revival of a number of sectors of the national economy. This time, the Bank of Canada was not given the honorable role of a catalyst for the growth of the Canadian currency, but it did not become an obstacle to the potential rise of it.

According to the regulator, to date, the Canadian economy has managed to avoid the worst-case scenario, that is, a complete failure in most industries. Such concerns were very relevant in April 2020, and the Canadian monetary authorities were wary of a destructive scenario. However, the situation was more favorable. According to experts, we should expect a sharp rise in the national economy in the second half of 2020. Experts are sure that further growth of the oil market will contribute to this.

The current macroeconomic data are particularly important to Canada's economic growth. On Friday, June 5, information on the labor market in Canada is expected to be published. According to analysts, the further vector of the USD/CAD pair depends on the unemployment rate in the country and the number of people employed in a number of sectors of the economy. On Friday morning, the pair was trading around the level of 1.3850, slightly lowering the volatility of previous days. Later, the USD/CAD pair approached the levels of 1.3760 - 1.3770, although it did not stay in this range, it tried to regain the lost positions. According to experts, the pair succeeds, but with varying success.

On the other hand, Rabobank's currency strategists maintained a relatively pessimistic forecast for the "loonie". They have no illusions about the further growth of the Canadian dollar. According to experts' calculations, this currency will decline to the level of 1.3800 over the course of the current month, but in the next three months, it will strengthen to the level of 1.4200. The bank emphasizes that the recovery of the loonie is facilitated by factors such as rising oil prices and increased risk appetite.

According to analysts, the current growth in the hydrocarbon market is not too large to help Canadian oil producers. It should be noted that the level of production at Canadian enterprises continues to decline at the moment, although the pace of deceleration is estimated as moderate. Experts say that the growth prospects of the Canadian dollar are under attack due to the high probability of the second wave of coronavirus. However, a more favorable scenario does not promise a sharp rise, although hopes for growth still continue.