Expected USD/CAD Range: 1.030 – 1.038
Update: A quiet morning for the Canadian Dollar with no major data releases scheduled either in Canada or in the US. Unsurprisingly, there is little volatility in the exchange rate and the Loonie is trading right around Friday’s closing levels of 1.034. The focus continues in the short term to be on any news that might provide a clue as to the Fed’s decision on tapering in September.
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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