Expected USD/CAD Range: 1.062 – 1.068 Update: The day has already been eventful and we are only getting started. One measure of private sector hiring in the US suggested a stronger than expected US employment picture and reignited the debate on the timing of tapering. Canadian International Merchandise Trade for October was well ahead of expectations. The net result was the Canadian Dollar trading slightly weaker at 1.066. All eyes are now on the Bank of Canada and its rate decision later this morning. No rate cuts are expected but there is a minority view that the bank may lean dovish versus the status quo of a neutral stance on cuts. 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. We expect the CAD to be even lower relative to its US counterpart by the end of the year.
Account to Account
