Expected USD/CAD Range: 1.060 – 1.065 Update: The US Dollar is again lower against most majors and flat against the Canadian Dollar at 1.06. The loonie rebounded yesterday throughout the day and is now at its strongest levels since late November. We had been arguing for a short term rebound and now expect the currency to stabilize at these levels for the rest of the year. There is quite a bit of focus on Western Canadian Select prices this morning as that major Canadian export trades at the lowest discount in roughly two months to crude prices. South of the border, Congressional negotiators seem to have agreed on a process for avoiding another budget showdown, though Congress has yet to approve the plan. 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 7% relative to the USD since the beginning of the year and we expect it to continue declining next year.
Account to Account