Expected USD/CAD Range: 1.046 – 1.051
Update: The Canadian Dollar is up 0.5% and currently trading at 1.048, the strongest level for the currency in five days. Most of the move happened overnight as better than expected GDP figures out of China contributed to healthy positive moves to all “risk” currencies, including the Loonie. In addition, as expected, the Bank of Canada’s release this morning maintained the mildly hawkish bias contributing to the strength of the Canadian Dollar.
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 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.
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