Canadian Dollar Forecast: Downside Ahead for CAD to USD Exchange Rate

CAD/USD Exchange Rate Will Likely Head Lower

After a long downward journey, the CAD to USD exchange rate seems to have found some support. However, there are signs that confirm that the Canadian dollar forecast might see more downside ahead.

I’m seeing two factors in play that are likely to bring down the Canadian dollar and USD/CAD pair.

Firstly, four letters are sending tremors across global markets—N.I.R.P.!

Central banks of all of the biggest economies are moving in tandem. From Asia to Europe to North America, low interest rates have become commonplace. In a futile attempt to boost their struggling economies, central banks around the world have been cutting rates.

Some central banks seem to have gone a little too far in their efforts. The European Central Bank (ECB) and the Bank of Japan (BoJ) are worth a mention here. The two have surprised us with something we were previously unaccustomed to seeing—a negative interest rate policy (NIRP).

These global economic troubles are now spilling over to the U.S., pushing the U.S. Federal Reserve to contemplate a similar policy move. Yes, Fed Chair Janet Yellen has categorically said that negative interest rates are not off the table.

If the world’s biggest and most sustainable economy is feeling the heat, imagine what must be happening in Canada, a country closely tied to the U.S. and already battling a recession.

The Bank of Canada is now under pressure to match its policy with its global counterparts in order to save the Canadian economy. In fact, it is rumored that the Bank of Canada may eventually go down the same path as the ECB and BoJ—that is, pushing interest rates into negative territory.

Negative or not, an interest rate cut can have one—and only one—impact on the Canadian dollar and that is depreciation!

Read Full Article On ProfitConfidential