Expected USD/CAD Range: 1.032 – 1.039
Update: US retail sale figures this morning increased for a fourth straight month and came in slightly above expectations (when measured ex-Autos). As a result, the US Dollar is trading higher against all 10 major currencies, including against the Canadian Dollar which is down 20 points to 1.032. The Japanese Yen is the weakest of the major currencies and down over 1% against the Canadian Dollar based on reports that Japan is considering a cut in corporate tax rates.
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 policies aimed at balance sheet expansion. 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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