If you’re planning a major purchase in the U.S. or a vacation abroad, you may want to buy now rather than later. Scotiabank predicts the Canadian dollar will continue to fall for another year.
Canada won’t see an 80-cent loonie at least until 2018, the bank says in a new forecast.
With the U.S. on the verge of hiking interest rates and Canada expected to hold steady, investors are expected to bail on the Canadian dollar for the higher interesting-earning U.S. dollar, Scotia analyst Shaun Osborne wrote.
“Low energy prices ... and sluggish domestic growth imply continued downside pressure on the [Canadian dollar] through 2016,” he wrote.
He added that he sees “no rebound in crude oil until later in 2016 amid a continued supply glut.”
The loonie, which was trading at 75.8 cents U.S. as of mid-day Wednesday, will fall to 71.9 cents by the end of 2016, before slowly beginning to recover next year, the forecast said.
But even by the end of 2017, Scotiabank doesn’t see the loonie back up above the 80-cent mark, predicting it will hover around the 79-cent mark by then.
“The oil price shock has seen the Canadian economy decouple from the U.S. economic locomotive, something that the [recession in the first half of the year] underscored,” Scotia’s Osborne wrote.
“This is unusual and [recent] trends suggest that the economy is not regaining momentum all that quickly. We expect growth to remain relatively sluggish in the coming year.”