This morning, global equity markets and sentiment are more positive based on what are thought to be the initial, albeit tepid, steps by Beijing to kickstart a stalling economy by reducing levies on stock trading. The idea is that there will be additional stimulus and more substantial announcements by authorities in China.
This has, not surprisingly, tempered the movement of the safe-haven USD and accelerated the rebound of riskier currencies. The Canadian dollar is currently little changed from near three-month lows (CAD/USD highs) it touched against the US dollar last week after Federal Reserve Chairman Powell indicated that the Fed is ready to increase rates if needed and will hold rates at an elevated level for an extended period. The Fed also snuffed out speculation of allowing the target rate for inflation to breach the 2 percent mark.
The Canadian dollar will drift with market sentiment for the most part and continue to take its direction from several important data points that are expected south of the borders throughout the week. Domestically, all eyes will be on the key Canadian GDP number coming up this Friday. If the GDP number is weak, then expect additional weakness for the Canadian dollar as this will reduce the chance of a hike by the BoC. If the number is strong, you may see some appreciation (strengthening) for the Canadian dollar versus the USD dollar as the BoC will likely mirror the position of the US Federal Reserve, thus keeping interest rate differentials in line with the US Federal Reserve.
