*Updated* Ongoing Bank of Canada Benchmark Rate Announcements - Page 52 - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Slava · 02-28-2023, 06:46 AM

Be that as it may (and there are a number of factors that influence currencies, not just interest rates), Canadian GDP was 0.0 for Q4 and Q3 was revised lower. Inflation has fallen significantly here and it's hard to see the BoC raising rates given this information.

Yoho · 02-28-2023, 07:01 AM

Trip to Hawaii about to get more expensive if Canada sits on rates as the US pushes up.
Next stop for the Dxy is 108 imo.

The Fonz · 02-28-2023, 08:02 AM

Quote:

Originally Posted by Johnny199r

I’ve read that the Fed will likely continue to raise interest rates. This is going to cause our currency to go even lower vs the USD which means imports from the U.S (aka food) will continue to get more expensive here.

Doesn't increasing the overnight rate actually strengthen the CAD vs USD?

Slava · 02-28-2023, 08:23 AM

Quote:

Originally Posted by The Fonz

Doesn't increasing the overnight rate actually strengthen the CAD vs USD?

If the US boosts rates and Canada doesn't, the CAD should fall against the USD. But, there are a lot of factors and it's not that simple.

bizaro86 · 02-28-2023, 08:58 AM

The slope of the curve for currency forwards needs to be the differential in interest rates between the two currencies to avoid creating an arbitrage opportunity. While this covered interest rate parity is theoretical, in practice sometimes they blow out (eg during 2008-2009 there wasn't much borrowing capacity to close the spread).

https://www.investopedia.com/terms/c...ate-parity.asp

Johnny199r · 02-28-2023, 11:54 AM

Quote:

Originally Posted by Yoho

Trip to Hawaii about to get more expensive if Canada sits on rates as the US pushes up.
Next stop for the Dxy is 108 imo.

Traveling to the U.S is already tough with the current exchange rate - 1 CAD = .73 USD. I think it's going to get even more painful. The greenback has been pounding other currencies over the past year.

Yoho · 03-04-2023, 05:09 PM

https://twitter.com/user/status/1632086566024667137

https://twitter.com/user/status/1632097690942046216

Johnny199r · 03-04-2023, 06:06 PM

Quote:

Originally Posted by Yoho

https://twitter.com/user/status/1632086566024667137

Up goes the costs of imports.

The Fonz · 03-04-2023, 07:23 PM

Johnny199r, just realized I misread your post that I quoted at the top of this page. You said “the Fed” but in my head I was thinking you were talking about our BOC - that’s why I thought you were mixed up but clearly was me that just misread your post.

bluejays · 03-04-2023, 07:43 PM

I know Peter personally...he's not an economist or anything, lol. The Fed is intent foremost on dropping inflation. Long term they'll need to keep imports and exports in line. I wouldn't sensationalize anything related to them doing what they need to right now.

opendoor · 03-04-2023, 08:51 PM

I do get a kick out of people thinking they can reliably predict which way the currency is going to go. Do they honestly think that the market hasn't already priced in all that information already? The BoC having a lower terminal rate than the US Fed has been the market's expectation for months, so that's not new information.

If people truly think that the CAD is going to drop significantly, then short it and you make a lot of money if you're right.

Yoho · 03-04-2023, 08:58 PM

Quote:

Originally Posted by opendoor

I do get a kick out of people thinking they can reliably predict which way the currency is going to go. Do they honestly think that the market hasn't already priced in all that information already? The BoC having a lower terminal rate than the US Fed has been the market's expectation for months, so that's not new information.

If people truly think that the CAD is going to drop significantly, then short it and you make a lot of money if you're right.

I have, every stock market crash/ real estate crash the only thing that goes up is the dxy. Even Gold silver and everything else tank.

Long term I see dxy possibly going up as high as 172.

opendoor · 03-04-2023, 09:33 PM

172? You expect a $0.60 Euro or a sub-$0.50 CAD? Good luck with that.

The US is too debt laden to keep increasing treasury rates all that much more. Right now they're paying about 10% of their revenue on servicing their $31T debt with an average effective interest rate of 1.6%. 5% will be enough of a shock; they'll accept a higher inflation target before they start spending 40-50% of their revenue on interest payments.

Yoho · 03-04-2023, 11:35 PM

Quote:

Originally Posted by opendoor

172? You expect a $0.60 Euro or a sub-$0.50 CAD? Good luck with that.

The US is too debt laden to keep increasing treasury rates all that much more. Right now they're paying about 10% of their revenue on servicing their $31T debt with an average effective interest rate of 1.6%. 5% will be enough of a shock; they'll accept a higher inflation target before they start spending 40-50% of their revenue on interest payments.

I guess we’ll see.

dino7c · 03-05-2023, 01:15 AM

Quote:

Originally Posted by Yoho

Trip to Hawaii about to get more expensive if Canada sits on rates as the US pushes up.
Next stop for the Dxy is 108 imo.

1st world problems lol

Johnny199r · 03-05-2023, 08:30 AM

I expect our currency will decline to the high .60s vs the USD.

GGG · 03-05-2023, 11:56 AM

Quote:

Originally Posted by Johnny199r

Up goes the costs of imports.

From an inflation point of view I think this helps Canada. External goods get more expensive which are consumption oriented while exports earn more in CDM dollars which helps Canadians maintain jobs. So in general it pressures consumption without doing damage to the economy.

We get the benefit while only paying half of the cost.

Johnny199r · 03-05-2023, 12:39 PM

Quote:

Originally Posted by GGG

From an inflation point of view I think this helps Canada. External goods get more expensive which are consumption oriented while exports earn more in CDM dollars which helps Canadians maintain jobs. So in general it pressures consumption without doing damage to the economy.

We get the benefit while only paying half of the cost.

I'm not sure people who buy fruits, vegetables, and other imported groceries would fully agree.

opendoor · 03-05-2023, 01:17 PM

The exchange rate has a pretty minor impact on inflation. In the last 30 years the CAD has gone between $0.62 and $1.06 USD, and inflation stayed low the whole time up until the last 20 months or so.

In fact, pre-2021, some of the highest inflation periods we've had in the last 30 years have been the times when the CAD was roughly at par (parts of 2006-2008, and 2011).

calgarygeologist · 03-05-2023, 02:05 PM

Quote:

Originally Posted by opendoor

The exchange rate has a pretty minor impact on inflation. In the last 30 years the CAD has gone between $0.62 and $1.06 USD, and inflation stayed low the whole time up until the last 20 months or so.

In fact, pre-2021, some of the highest inflation periods we've had in the last 30 years have been the times when the CAD was roughly at par (parts of 2006-2008, and 2011).

Why omit 2002/2003 in your examples? 2002 was the weakest for the CAD which led to the highest inflation rate in Canada over the last 20 years outside of currently.