Interchange Financial

Expected USD/CAD Range: 1.046 – 1.052

Update: The US Dollar is stronger across the board and at near two month highs against the Canadian Dollar (last at 1.049). The strength is still being attributed to the Friday’s US job figures as well as Thursday’s GDP figure which were surprisingly strong. All of that is bringing back the talk of a possible move by the Fed to cut back on monetary stimulus beginning in 2013. More specific to the loonie, weaker crude prices this morning are also contributing to the selling pressure. We expect the loonie to continue to trade around the 1.049 level in the near future and gradually weaken into the new year.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.042 – 1.048

Update: It has been an eventful morning in the markets so far this morning. First, the ECB surprised almost everyone by lowering rates 0.25%. The Euro reacted immediately and strongly and is down over 1% against the loonie at 1.394. Indeed, a moderating of the strong European currency might have been part of Mario Draghi’s strategy. It is now becoming clear now that most developed market bankers have become focused on deflation and keeping their local currencies in check is part of that strategy. It is not quite “beggar thy neighbour” but does feel a little bit of a race to the bottom.

The second surprise of the day was that the US GDP QoQ growth of 2.8% for the third quarter showed …

Expected USD/CAD Range: 1.040 – 1.045

Update: The Canadian Dollar is stronger this morning and trading around 1.0425. The strength is primarily due to US Dollar weakness on the back of strong Euro-zone and UK economic data. Building permits in Canada came in below expectations but Toronto reported strong price and volume growth in real estate. In our view, the market will continue to be in this range until we get employment and GDP figures out the US tomorrow morning.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.040 – 1.048

Update: The Canadian Dollar is weaker overnight and trading near two months low at 1.044. The market is intently focused on economic data points due out later this week. Either they will reinforce the developing sense that the Canadian economy is stronger than expected as indicated by the GDP figure last month or they will show that the GDP mark was a blip and that our Central Bank is seeing things right in anticipating slower growth. If the economic figures (building permits and employment) are strong, the market will reconsider the negative bias towards the Canadian Dollar. Otherwise, expect the loonie to continue to decline.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.038 – 1.046

Update: The Canadian Dollar is showing some strength and trading the around the 1.040 level. Some of the strength is attributable to the strength is the Australian Dollar being interpreted as showing improved prospects for commodity-based currencies. The failure of Blackberry to sell the company is dominating the business headlines in Canada but is largely impactful on the exchange rate. US Factory Orders for September are out at 10 AM and will be the main economic data point of the day.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters.  In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.038 – 1.046

Update: The Canadian economy grew 0.3% in August, well ahead of a consensus estimate for 0.1%. While we believe that in the longer term the Canadian Dollar will depreciate (see “The Big Picture” below), given the accumulating evidence of the relative strength of the Canadian economy, the slide of the loonie might be reversed in the near future in response to this latest data point. Indeed, the Canadian Dollar is up 50 pips since yesterday’s close and at 1.043. In the short term, we expect the Canadian currency to continue to firm up against its US counterpart.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.042 – 1.047

Update: The Canadian Dollar is flat to last week’s close this morning at 1.044. The focus this week is on the FOMC announcement expected on Wednesday. While the announcement is unlikely to make much news, market participants will be looking for clues to the US central bank’s inclinations as to the timing and nature of any future pullback of the existing monetary stimulus programs. We expect the Canadian Dollar to see some technical strength this week after the significant sell-off last week and would encourage US Dollar sellers to take advantage of the current levels.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.042 – 1.047

Update: Canadian Dollar weakness continues in response to Wednesday’s surprise announcement by the Bank of Canada. The loonie, now trading at 1.044 is the weakest performing major in the last few days and is down 1.36% this week alone. We believe that the selling has subsided and that the loonie will hold these levels in the short term.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.037 – 1.043

Update: In a major surprise to the Canadian financial markets, the Bank of Canada took its already mild hawkish bias on interest rates to a completely neutral stance. The theoretical implication is that the next interest rate move is as likely to be down as it is up. Practically, the change means that an interest rate increase is even further away than previously anticipated. The change is in line with what we have long argued is likely to be the new focus of the bank on exports under Governor Poloz (see our foreshadowing of this move here). There were other changes to the bank’s stance, including a downward revision of growth estimates but these other changes were previously telegraphed by various bank officials.

The markets reacted immediately with the loonie now trading at 1.041 and up over a penny since yesterday morning. We continue to believe that the Canadian Dollar will be even weaker by year end.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …