Expected USD/CAD Range: 1.039 – 1.047 Update: The US Dollar is trading at the highest level in about three weeks against the Loonie and we suggest sellers of US Dollars take advantage of the move. Markets globally are in “risk-off” mode and not surprisingly the Canadian Dollar is declining. In fact, the Canadian Dollar is the worst performer of the majors so far today. The markets are again considering the implications of a global tightening of monetary policy with the focus this time on the Bank of England’s somewhat hawkish language. Yesterday, two separate Federal Reserve officials indicated that the expected “tapering” in the United States could begin as early as September. In Canada, the only notable economic data point of the day was building permits which showed significant weakness (down 10.3% vs. an expected decline of 2.8%) adding to the Loonie’s weakness. 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.
Account to Account
