(November 30) – The year 2000
isn’t going to bring much to boost
the Canadian dollar, say
CIBC World Markets
economists.
The Bank of Canada’s recent
rate hike and moderately hawkish
Monetary Policy Report, “has
bought the Canadian dollar some
protection from ongoing concerns
about future Fed hikes,” says
CIBC.
Couple this with upgraded
economic prospects, commodity price
improvements and anticipated
federal tax cuts, says CIBC, and
the loonie should trend moderately
upward through the winter.
However, the American and
Canadian central banks will
probably raise rates again in
March. So there is no
“significant upside in
2000″ for the loonie. By
mid-2000, CIBC expects the loonie
“to temporarily drift back
to 1.49 C$/US$.”
As for the beleagured Euro, CIBC
says another European Central
Bank “rate move looks to be a
distant prospect.” The Euro
may break parity with the U.S.
dollar, before recovering in 2000,
says CIBC. The ECB will make 100
basis points worth of rate hikes
in 2000, compared to just 25 bps in
the U.S, CIBC economists predicts.
Across the channel, CIBC
expects the Bank of England will
raise its rates just 50 bps in
2000. The pound should weaken
against the Euro as a result.
The U.K.’s trade deficit and
the country’s possible entrance
into in European monetary union
will be negative for the pound
against the Euro, says CIBC.
-IE Staff
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