Richter survey of bank forecasts: Foreign exchange and interest rates

November 2015

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Loonie forecasts largely unchanged, outlook remains weak

The banks largely maintained their forecasts on the value of the CAD relative to the USD through 2016. With the currency pair trading at between 90 to 100 US¢/CAD for the most part through 2012 to 2014, it now seems far-fetched that the value of the CAD will reach these levels as far as the surveyed forecasts are concerned. As reported below, the CAD is expected to trade within a tight range relative to the USD, with the banks calling for the currency pair to trade no lower than 73.0 US¢/CAD and no higher than 78.1 US¢/CAD.

EUR continues to depreciate relative to the CAD, outlook uncertain

With open statements that the European Central Bank ‘will not hesitate’ to expand its quantitative easing program, the EUR grew out of favor in comparison to some global currencies, including versus the CAD. The EUR depreciated relative to the CAD through October and midway through November, with the near term forecasts of the currency pair remaining largely uncertain. With the exception of CIBC, the reporting banks expect the EUR to remain muted or depreciate further relative to the CAD, but the extent of that depreciation remains divided as demonstrated by the wide range of 2016 year end forecasts.

Will rates rise already?

RBC, National Bank and Desjardins all revised down their 2016 year end federal funds rate forecasts. The consensus remains that the Fed will hike rates through 2016, albeit to a lesser magnitude. All eyes are on the FOMC ahead of the December 15 announcement. 

In Canada, there are no changes to the overnight rate forecasts month over month. The bank surveys indicate that the Bank of Canada is expected to maintain the overnight rate at 0.50% through September 2016, with RBC as the sole surveyed bank anticipating a hike by 2016 year end.

2 year Canadian and US government bond yields to slowly rise 

Scotiabank revised downwards its 2016 year end forecasts since last reporting, but continues to anticipate the steepest increase in the 2 year Canadian and US government bond yields.

10 year government bond yields to increase

RBC once again revised down its estimated 2016 year end 10 year Canadian and U.S. government bond yield estimates, with now Laurentian forecasting the highest yields through 2016. The consensus amongst the surveyed banks remains that the rates will rise gradually.



Banks forecasting increases to long bond yields through 2016,
Laurentian most bullish


Laurentian is anticipating the largest increases to long bond yields from current levels at all points through 2016. CIBC sees a flattening of long bond yields through 2015, then joins the remaining surveyed banks in forecasting an increase by 2016 year end.



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