Expected USD/CAD Range: 1.031 – 1.037
Update: The Canadian Dollar is flat at around 1.034 this morning. Overnight, news that the central bank in New Zealand has shifted to an even more hawkish bias is leading to some speculation that the BoC may follow soon. That extrapolation is a step too far for us but it is nonetheless an interesting development in another commodity-based currency. US jobless claims came in at slightly better than expected levels this morning and led to a mild firming of the US Dollar. We expect little volatility in USD/CAD rate today.
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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