(June 1 – 16:25 ET) – BMO Nesbitt Burns Inc. is puzzled over the fate of the Canadian dollar, suggesting that the loonie is condemned to languish for the rest of the year.
In the wake of yesterday’s strong GDP and current account data, BMO Nesbitt notes that despite strong economic fundamentals, the outperformance of the TSE and the Bank of Canada’s apparent willingness to match the U.S. Federal Reserve Board rate hike for rate hike, the loonie continues to struggle.
The firm suggests that the dollar will continue to wallow for the rest of the year, with some hope that it will “grind higher” in 2001. Weighing on the dollar are the possibility of further tightening by the Fed, uncertainty over Bank of Canada governor Gordon Thiessen’s replacement, and rumours that Finance Minister Paul Martin will step down ahead of the next federal election, says BMO Nesbitt Burns.
As for the struggling euro, BMO Nesbitt Burns expects to see it flounder for a while before creeping back toward parity with the U.S. dollar later this year.
-James Langton