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USD to CAD Forecast: Will US Dollar-Boosting June Rate Hike Come to Pass?

Federal Reserve

The US Dollar has made marginal gains against the Canadian Dollar today, but could see a major surge on a near-term central bank decision.

The Federal Reserve is due to meet and discuss interest rates on June 14th, an event which could see the USD CAD exchange rate rally.

The Fed last raised US interest rates in March and according to some economists, the next of three planned hikes is long overdue. The odds of a June interest rate hike are currently over 95%, although recent US domestic data has raised questions about whether a hike will actually go ahead.

The US trade deficit expanded significantly in April against forecasts, while the number of jobs added in May was also below expectations. That said, the US unemployment rate in May fell to 4.3%, despite predictions for stagnation at 4.4%.

Offering a concise forecast for June has been Professor of Economics Jonathan Wright;

‘I’d be very surprised if they didn’t hike in June, given all the signals that they have sent’.

If the Fed does hike interest rates in June, the US Dollar could make only marginal gains due to the outcome being so heavily priced-in. Further ahead, disappointing jobs data may make March and June the only rate hikes of 2017. Commenting on the matter has been PNC Senior Economic Advisor Stuart Hoffman;

‘Unless we see some pickup in the summer months, not just in the job numbers but also in wages and inflation, there’s less-than-even odds that the Fed will go in September’.

If the rest of 2017’s Fed interest rate decisions bring rate freezes, then the US Dollar could repeatedly slide against the Canadian Dollar.

The future Canadian Dollar to US Dollar exchange rate may be decided by trade negotiations between the US and Canada. Specifically, the North American Free Trade Agreement (NAFTA) is due to be ‘renegotiated’ in August, which could cause a major upset in Canada’s trading relationships.

US President Donald Trump has called for NAFTA to be revised to better suit the US’s interests, but this could lead to Trump tearing up the deal altogether.

If it looks like the writing is on the wall for NAFTA, then the Canadian Dollar could slump due to the negative implications for future Canadian economic links.

Recent Interbank USD CAD Exchange Rates

At the time of writing, the US Dollar to Canadian Dollar (USD CAD) exchange rate was trading at 1.3497 and the Canadian Dollar to US Dollar (CAD USD) exchange rate was trading at 0.7407.