Market Update - July 20th, 2021

Jul 20, 2021 | St Louis Private Wealth Management


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Good morning,

I hope everyone is coping with the smoke in YYC over the past few days. We received quite a few questions about our forecasting of CAD/USD last week on the announcement of travel restrictions easing for Canadians looks to travel out of the country. Below is out most recent forecast and a quick note about Canada opening our boarders to international travelers.

The Canadian Dollar

For the first time since March of this year, the loonie fell below 79 U.S. cents. With investors shedding risky assets (the Dow fell by more than 2%) the loonie lost ground to traditional safe havens like the U.S. dollar and Japanese yen. An OPEC+ deal to expand oil production, which contributed to a sharp decline in crude prices, didn’t help. Monday’s losses continue a reversal of fortune for the loonie, which was as high as 83 U.S. cents at the beginning of June. What was previously the best-performing currency of 2021 has effectively erased all of its year-to-date gains relative to the U.S. dollar. Growth worries sparked by the Delta variant seemed to be the catalyst for Monday’s losses, but other factors have taken the shine off the Canadian dollar, too. Non-energy commodity prices like lumber are down from their earlier highs, and the Bank of Canada no longer looks like a lone hawk among its central bank peers.

A softer currency is good news for Canadian exporters, as long as the growth concerns that drove yesterday’s selloff remain just that. Trade confidence was at a 20-year high in the second quarter as a strong global growth outlook offset worries about a previously rising Canadian dollar. Those planning to take advantage of easing border restrictions won’t get as much bang for their buck when spending abroad, but a few cents on the dollar might not be enough to discourage would-be travelers that have been stuck at home for more than a year. While the loonie seems to have lost the market’s favor, solid fundamentals supporting the Canadian economy—including a high vaccination rate, low COVID case counts and gradually easing restrictions—should continue to support the currency. We see the Canadian dollar ending the year in the 80 U.S. cent range. But there may be some volatility along the way.

Canada Opening Up Borders

As of August 9, fully vaccinated citizens and residents of the U.S. will be able to come to Canada without quarantining. Starting September 7, fully vaccinated people from other countries will get the same treatment. The changes reflect Ottawa’s incremental and cautious approach to loosening COVID-era border rules, but should please business groups who’ve been pushing for a border reopening. Ottawa also said it plans to do away with a requirement for post-arrival COVID tests; travelers will still be subject to random checks. It also gave mid-sized Canadian airports the green light to accept international flights starting August 9, meaning international travelers coming to the country won’t all be funneled through four airports (Vancouver, Calgary, Toronto and Montreal) as they have been during the pandemic.

Please continue to call us as our entire team stands ready to listen and speak with you. We can also be made available to speak with any friends and family who may need reassurance during these times.

Have a great day!

Devin

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Economy Markets