A strong U.S May jobs report on June 5 added momentum for the Federal Reserve to raise interest rates this fall.
That helped the U.S. dollar rally against a basket of currencies and kept the negative bias on the Canadian dollar.
However, the effect on the loonie was muted as the May Canadian jobs report was also much better than expected, sinking the idea that the Bank of Canada would need to lower interest rates to offset the negative economic effects of weak oil prices.
Most Canadian commercial bank outlooks see the loonie remaining weak through 2016.
After falling below US80 cents in March the loonie rallied to 83 in the first half of May and is now around 80 cents. But it will likely fall below 80 again in the fourth quarter of the year according to forecasts from ScotiaBank, CIBC and BMO Capital Markets. RBC has the worst outlook at 77 cents.
RBC maintains a sub 80-cent loonie through 2016 but the other banks see it creeping back above 80 cents. BMO’s outlook is most optimistic at 84.7 cents by the end of 2016.
