Expected USD/CAD Range: 1.043 – 1.053
Update: The likelihood of military action by the US in Syria is dominating the headlines again today. The Loonie is up against most major currencies as crude oil trades at near two year highs. However, the Canadian Dollar is generally flat against the US Dollar at 1.0475 as the potential of Syrian action has led to broad gains by the USD as investors de-risk portfolios and move to perceived safe havens.
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.
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