Expected USD/CAD Range: 1.046 – 1.052
Update: The Canadian Dollar is slightly stronger this morning trading at 1.048. There is little economic news on the North American agenda today. Much of the action is in Europe where the Pound Sterling is significantly stronger after the BoE indicated some surprising bullishness on the economy and employment in particular. Closer to home, Bloomberg points out that the Canadian Dollar is the most downgraded currency in the last month with analyst forecasts averaging 1.06 for the end of 2014.
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 no interest rate moves until 2015. Globally, the commodity boom has 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. As a result of all of this and not surprisingly, the CAD has declined over 6% 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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