Flat Q3 GDP pushes USD/CAD to one-year peak amid forecasted rate reduction
2023.10.31 14:08
The US Dollar to Canadian Dollar () exchange rate has reached a one-year high, following an underwhelming performance of Canada’s economy in the third quarter of 2023. The flat Q3 GDP comes on the heels of a slight dip in Q2, falling short of the Bank of Canada’s growth projection of +0.8%.
Goods-producing industries, predominantly agriculture, have been on a downward trend for five consecutive months due to drought conditions in Western Canada. This downturn was further exacerbated by early quarter disruptions from fire and strikes, a decline in retail sales, and a stall in the post-pandemic recovery of food and accommodation services.
CIBC warns that this downturn may undervalue the actual economic strength. Despite the current economic climate, Canada has experienced robust population growth and many homeowners have yet to feel the impact of higher interest rates.
In response to these factors and in an effort to prevent further economic decline, CIBC forecasts that the Bank of Canada will transition from rate hikes to cuts next year. This prediction is based on the expectation that a rate reduction will stimulate economic activity and counterbalance the challenges currently facing goods-producing sectors.
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