Weekly "Focus" and Will it be June or July?

The Canadian dollar is trading near its lowest level of the year, just above 73 cents to the US dollar, meaning it takes about $1.37 to buy one US dollar. Canadian snowbirds are now back from their winter away but are no doubt hoping for some improvement in the exchange rate before they head south again.

 

 

What’s causing the weakness? One explanation is the anticipation that the Bank of Canada is getting poised to lower interest rates, ahead of any move by the US central bank. The next two announcements on interest rates are scheduled in Canada for June 5^th and July 24^th. This week the Bank of Canada published its Financial Stability Report and highlighted that Canadians who took out mortgages in 2021 and 2022 will be facing the most financial pressure as they “generally have taken on large mortgages relative to their income and have seen little increase (and potentially a decrease) in home equity” (ii). A cut in interest rates will be especially good news for homeowners with variable rate mortgages who have been most exposed to the higher interest rate environment but could limit any near-term recovery in the Canadian dollar.

 

This week’s "Focus" from our economics team is attached.

 

Have a great weekend,

 

Brad

Senior Portfolio Manager and Senior Investment Advisor