Expected USD/CAD Range: 1.065 – 1.070 Update: According to this morning’s data, the US is humming along just fine with manufacturing leading and consumers dragging. GDP grew at 3.6% in Q3 (above consensus of 3.1%) and jobless figures came in slightly below expectations. In Canada, the building permits figure came in at well above expectations and probably heightens the tension between the Bank of Canada’s desire to stimulate export growth without fueling asset bubbles. The Canadian Dollar is flat to yesterday’s close at 1.068. 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.
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