Expected USD/CAD Range: 1.037 – 1.043 Update: The Canadian Dollar is up over 1% and trading at 1.040, the strongest level in about three weeks. The primary market mover was the jobs numbers released this morning. The US figures came in below expected levels and there was a significant downward revision to last month’s figures. At the same time, the Canadian job creation data (which is quite a bit more volatile for underlying statistical reasons) came in at roughly three times the consensus level. After the announcement, the Loonie immediately jumped 40 pips to add to the gains overnight on the back of stronger commodity prices. 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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