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Canadian Dollar Morning Update
Expected USD/CAD Range: 1.035 – 1.040 Update: After an eventful week of central bank watching, the focus for the Canadian Dollar now turns to economic data with the jobs data on Friday a big focus for the Loonie. There is some speculation in the market that the weak jobs number out of the US last week might be reason to think that the Canadian employment figures will also come in below expectations. Given the focus that the Central Bank has shown in the past on housing prices, we will also be watching housing numbers out later this week in Canada. The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have slowed notably. At the same time, the ongoing (admittedly halting) recovery in the US will sooner or later lead to a tapering of the Fed’s policies aimed at balance sheet expansion. Closer to home, Canada’s new central banker shows no inclination towards tightening in the near future. As a result of all of this and not surprisingly, the CAD has declined 5% 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.