>David Doyle of Macquarie Capital Markets Canada Ltd. says two major factors are going to conspire to drag the loonie almost 10 cents lower than its current level of around 74 cents US over the next year: interest rates and the price of oil.
>The biggest factor in Doyle's analysis is the sudden divergence in monetary policy between Canada and the United States. In the U.S., the Federal Reserve hiked its benchmark interest earlier this month and is signalling that it expects to do so again at least three more times next year.
>The Bank of Canada, meanwhile, is saying loudly and clearly that is had no intention of following suit. Economists are expecting the bank to stay on the sidelines through 2017 at least, and if any action comes it will likely be to make rates lower — not higher.
>Divergence in monetary policies between the two closely tied countries is rare, so when it happens the impact tends to be large. Higher rates in the U.S. will drive up the value of the U.S. dollar versus everything. Couple that with lower rates in Canada, and you have a recipe for a cheaper loonie.
cbc.ca
Welcome back, Canadian peso. This might be okay if we could get manufacturing to come back, but with Ontario the way it is, I doubt it. We're also going to be inundated with US liberals will like living with a country with a shit currency but doesn't controlled by drug cartels.
