We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment George provides a summary and review of his macro-economic view for the year ahead. 

 

View the George Davis Report

 

For growth, a recession is still expected both here and in the US with improvement expected during the second half of 2024. With the Bank of Canada’s preferred inflation measures declining but still hovering above their 2% target at ~3.5%, the Bank will keep the door open for interest rate hikes.  However, recent rate hikes and the slowdown in economic growth should help headline inflation move towards the BoC’s 2% target.  For Interest rates, George feels that we have reached the terminal rate in Canada and the US and that rates will not have to be raised next year.  As for rate cuts, George expects the BoC to be a little more patient than the Fed with the Fed likely cutting rates sooner than the BoC. 

 

CAD is expected to remain under pressure during the first half of 2024, peaking at 1.38/1.39.  However, once the BoC and Fed start cutting rates and the business cycle shifts into positive territory, CAD will see a benefit, shifting towards the 1.3500 area mid-year.  Thus, USD sellers should focus on the first half of 2024, while USD buyers will see opportunities during the second half of 2024.