Expected USD/CAD Range: 1.027 – 1.032
Update: The Canadian Dollar is mildly weaker against its US counterpart today and trading at 1.030. August wholesale sales data in Canada were up 0.5% and stronger than the consensus of 0.3% but weaker oil prices have been holding the Loonie down this morning. The markets are focused on Wednesday’s Bank of Canada policy report as well Tuesday’s unemployment release in the US.
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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