Expected USD/CAD Range: 1.035– 1.040
Update: The outlines of a compromise between President Obama and the House seem to be coming into focus with a short term extension of the debt ceiling and an end to the shutdown. Weekly jobless claims in the United States came in higher than expected. In Canada, new housing prices rose 0.1% last month and 1.6% over the last year. All in all the Canadian Dollar is roughly flat at 1.039.
The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have slowed notably and while some of the data from China is encouraging, it is becoming clear that sub 8% growth in China is here to stay. 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. Closer to home, Canada’s new central banker is optimistic about our recovery but shows no inclination towards raising rates in the next several quarters. As a result of all of this and not surprisingly, the CAD has declined over 3% 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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