Canadian Dollar Morning Update

Expected USD/CAD Range: 1.053 – 1.059 Update: The Canadian Dollar is lower for a sixth day in a row and trading at its lowest level in six weeks. While most of the recent move has been due to a broad demand for the US Dollar, in the last couple of days we are seeing some selling specific to the Loonie, probably due to mild inflation figures released this morning and weak retail sales data from yesterday. The Loonie is now trading at 1.055 and down nearly 2% this week. 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.