Expected USD/CAD Range: 1.034 – 1.040
Update: The Canadian Dollar which was already trading at a three week high this morning gained further ground after the release of data indicating that building permits in July were up 21% (versus an expected increase of 3.5%) over previous month. The increase was largely in the non-residential sector and is not likely to impact BoC’s view of the residential real estate market. The Loonie is currently at 1.037 with the market still very much focused on developments out of Congress this week with respect to Syria and diplomatic developments overseas.
The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have slowed notably. At the same time, the ongoing (admittedly halting) recovery in the US will sooner or later lead to a tapering of the Fed’s bond purchase programs. As to the timing of the announcement, there seems to be broad consensus forming about tapering beginning later this year with a majority of analysts focused on September. Closer to home, Canada’s new central banker shows no inclination towards tightening in the near future. As a result of all of this and not surprisingly, the CAD has declined 5% relative to the USD since the beginning of the year. We expect the CAD to be even lower relative to its US counterpart by the end of the year.
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