National Bank Financial - Currency Outlook: Peering over the cliff

National Bank Financial - "Peering over a cliff can give vertigo and this is what seems to be happening to the US economy. Growth stateside is set to decelerate sharply in Q4 partly due to the damage caused by storm Sandy, but mostly because of the uncertainty brought by the fiscal cliff. We suspect that risk aversion could make a comeback as markets price-in a higher probability of a US recession. The US dollar can therefore rebound over the next few months at the expense of the euro and commodity currencies.
(...) While we expect a temporary depreciation of the Canadian dollar (we’re maintaining our end-of-Q1 target of 1.04), we expect the loonie to strengthen again towards the end of 2013. Foreign demand for our securities should remain strong given our AAA rating and solid fiscal footing, attributes that are becoming harder to find these days among sovereigns."

NBF Currency Outlook*
Current 5-Dec-12/ 2013Q1/ 2013Q2/ 2013Q3/ 2013Q4
USDCAD 1.01 1.04 1.03 1.00 0.98
US cents per CAD 0.99 0.96 0.97 1.00 1.02
EURUSD 1.31 1.23 1.25 1.27 1.26
USDJPY 82 81 83 85 90
AUDUSD 1.04 1.00 1.03 1.06 1.06
GBPUSD 1.60 1.57 1.60 1.63 1.62
USDCNY 6.23  6.26 6.23 6.19 6.15
AUDCAD 1.05 1.04 1.06 1.06 1.04
* Forecast for end of quarter
Source: NBF Economic Research

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