Invesco Canada blog

Insights, commentary and investing expertise

Interest-rate outlook: Impact of upcoming British election

The yield on the 10-year Canadian government bond broke through its recent range of 1.60%-1.87%, reaching a low of 1.43% on April 18.1 Geopolitical risks, as well as concerns about elections in France were the big driver as the economic data in Canada has been fairly positive.

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Currency outlook: Global growth, eurozone elections continue

Canadian dollar strength has faded recently despite stronger economic data. Weakness in oil prices has been responsible for some of the reversal. The Bank of Canada has, at least temporarily, dropped its dovish tilt, but appears content to leave the overnight rate target at 0.50% for the foreseeable future.1 The Canadian dollar continues to remain overvalued, in our view.

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Currency management: A simple roadmap

Global diversification has become standard practice among investors around the world. As the trend toward global investing grows, managing currency risk in global portfolios is likely to take on increasing importance. Sovereign wealth funds, central banks and other investors are likely to consider the benefits and challenges of currency hedging as their investment strategies become more globally focused. However, evaluating the impact of foreign exchange risk on portfolios and how to address that risk is a debated issue. Should global investors adopt strategies to specifically address currency risk or should they not?

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Currency outlook: CDN overvalued, USD mixed

The Canadian dollar was reasonably strong until the first week of March, when the U.S. Federal Reserve (the “Fed”) began telegraphing the prospects of a rate hike at its March meeting. The Bank of Canada has appeared to continue to favour a somewhat weaker currency in spite of some strong economic data, including very strong full-time employment reports. Our opinion remains that the Canadian dollar is overvalued and we favour being short the currency.

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Interest-rate outlook as global growth improves

The 10-year Canadian government bond yield has retreated from its 2017 peak yield of 1.87% and currently sits in the middle of this year’s range of 1.61% – 1.87%.1 Economic data has generally been picking up this year with employment growth showing particular strength. The Bank of Canada has kept policy on hold recently, but remains wary of persistent economic slack. We believe the current trading range is likely to persist unless global economic growth picks up further.

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