Canadian Dollar Morning Update

Expected USD/CAD Range: 1.030 – 1.035 Update: As we head into the monthly announcement by the Bank of Canada this morning, the Canadian Dollar is trading at its lowest level in about a week at 1.032. The loonie is down along with its commodity sisters as investors fret over news out of China suggesting that there may be an interest rate raise forthcoming from that country’s central bank. The expectation is that little news will come out of the Bank of Canada release and news conference as both the expected downgrade in growth forecasts as well as the bank’s likely policy statement have been telegraphed and priced into the market. We expect continued US Dollar strength today. 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.