Expected USD/CAD Range: 1.037 – 1.042 Update: After a quiet Monday, overnight news has weakened the Canadian Dollar by 0.5% against the USD to 1.039. The Loonie is also down substantially against the Euro (1.1%). Signals from Australia’s central bank signalling a weak dollar policy have been dragging down all commodity-currencies, including the Loonie. Significantly weaker than expected Wholesale Trade Sales figures released this morning and soft commodity prices have contributed to the weakness of the Loonie. All eyes are focused on tomorrow’s release of FOMC minutes which may provide additional colour as to the timing of “tapering” by the US central bank. 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 bond purchase programs. As to the timing of the announcement, there seems to be broad consensus forming about tapering beginning later this year with a majority of analysts focused on September. 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 4% 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