Since the value of the loonie (and realistically, most currencies) is a reflection of what is going on in the country, it is important to consider some of the major events that have happened within our economy since they impact the value of the Canadian dollar.
Last Year at a Glance
This time last year was the loonie’s high for 2018, sitting around .80 to 1 US dollar. From then, the loonie’s value decreased through January and February sinking to .76 in mid-March when it began to rise again to .79 in mid-April. After the spring, the loonie’s value fluctuated up and down more frequently. From the peak in April, the loonie trended downwards and reached a low of .75 in late-June. Throughout the summer and fall, the loonie slowly and unsteadily trended upwards again to .77 in early-October before ultimately trending downwards to the year’s low of .72 in late-December.
Some experts are calling 2018 “the year of bubble bursts.” 2018 saw both Bitcoin (and cryptos) and marijuana stocks bubble and burst. Bitcoin bubbled in late 2017 and was the first to pop in 2018. The marijuana bubble didn’t pop until later in 2018, in fact, a few days after legalization took place on October 18th. The stock market also saw Facebook and Apple stocks pop in late 2018.
Although talk of NAFTA negotiations began in January 2017, the first round of negotiations didn’t occur until August 2018 – right around when the loonie peaked in August and promptly fell in September. The sudden drop could have been due to investor uncertainty surrounding the deal.
The negotiations were nail-biting; Canadians watched in suspense as consensus failed to be reached and as the President tweeted about our Prime Minister. It’s probably no coincidence then that the loonie’s last peak of 2018 coincided with the end of NAFTA negotiations and a formal agreement met on October 1st.
In general, Canadian forex experts have experienced more difficulty making predictions since President Trump came into office. As Canada sits next-door to the largest economy in the world, the “Trump Effect” creates a lot of investor uncertainty in the stock market.
Trans Mountain Pipeline
In regards to the Trans Mountain Pipeline, the year began with a spitting contest between Alberta premier Rachel Notley (for) and BC premier John Horgan (against). The two provinces clashed in a way that seemed like sibling rivalry – until the Federal government stepped in and put an end to the squabbling by announcing a deal on May 29th to buy the pipeline from Kinder Morgan for $.4.5 billion dollars. On the same day of this announcement, the loonie experienced a dip.
The Canadian economy is greatly influenced by our oil exports. Considering plummeting oil stocks, the turmoil and unresolved issues surrounding the pipeline, and the time it will take to finish it and begin to turn a profit, many experts believe the loonie will fall yet again in 2019 despite any headway the Trans Mountain Pipeline makes.
So, beginning 2018 at its highest and ending at its lowest, the question on everyone’s minds is “what can we expect of the loonie in 2019?” While it’s impossible to say for certain, there is a lot of speculation floating around.
Many experts agree that the value of the Canadian dollar will rise – at least a little bit. While some say it will go up by ten cents, others say by only two. However, since the Canadian dollar has been volatile all year, many believe it is set to continue on that track in 2019.
Now, we don’t really have a crystal ball, but as your local Foreign Exchange Experts, we have a few predictions for the Loonie in 2019. Theresa Munro, our Senior Manager of Central Operations says “risk is high to the downside for the Loonie” due to several factors including the USMCA agreement being still unratified, the ongoing issues between the U.S and China, and the continuingly plummeting oil prices.
However, Munro adds that the U.S economy is expected to slow in the second half of 2019 which would cause the USD to drop. This is good news for the euro, the pound sterling, and of course, the Canadian dollar. Additionally, we must consider that 2019 is a federal election year, which will also have implications on the loonie.
With so many factors, it’s hard to say what the future holds for the loonie!
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