Updates (2013-2014)

Expected USD/CAD Range: 1.108 – 1.113

Update: The Canadian dollar is flat overnight after weakening slightly during the day yesterday. The loonie is currently at 1.110 against the US dollar. With the exception of a read on US wholesale inventory levels later this morning, few economic data points are expected today or tomorrow. With commodity and energy prices flat and the US dollar mixed against most majors, we expect little volatility unless geopolitical events intervene.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.105 – 1.112

Update: Friday’s weaker than expected jobs gains and trade data continue to be the main story today for the Canadian dollar. That data, along with a much stronger than expected US jobs report, has the Canadian dollar trading at near two week lows. Also, contributing to loonie weakness are weak commodity prices resulting from data showing Chinese exports fell by more than expected in February. This morning’s housing starts data in Canada confirmed that housing remains strong and that the much needed rotation into exports and away from housing has not yet happened in Canada.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.104 – 1.112

Update: The last couple of days have been a bit of a roller coaster the Canadian dollar. Yesterday, we had the Bank of Canada remaining neutral while noting the better than expected data as well as strong building permit figures which along with overall US dollar weakness had the loonie trading at two week highs. This morning, that trend has sharply reversed as a result of stronger than expected employment figure in the US but much weaker than forecast employment in Canada (-7k net change in employment versus consensus of +15k). USDCAD is currently at 1.108.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.104 – 1.1101

Update: The Bank of Canada releases its monthly interest rate statement this morning and while no rate change is expected, the specific wording of the statement will be analyzed closely for clues to future possible actions. We believe that this statement will closely follow the language of the previous statement and maintain the mildly dovish language. Despite surprisingly healthy economic data including higher than expected growth and inflation, it seems unlikely that the Bank will alter its current posture which it has carefully staked out in the last several months. The Canadian dollar is currently stronger as market consensus seems to slightly favour the Bank adjusting language away from its dovish stance by acknowledging recent economic data. We believe the loonie will be trading lower after the announcement.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.105 – 1.111

Update: Market action this morning suggests that most participants are viewing events overnight in the Ukraine as stepping back from the brink of crisis. Equity markets are regaining some of the ground lost yesterday, commodity prices are moderating, and emerging market currencies, including the Russian ruble, are strengthening. The Canadian dollar remains flat and is likely to be range-bound until tomorrow’s Bank of Canada release. Despite some confusing economic data points both here and in the US over the last month, we do not expect the Bank of Canada to deviate from its mildly dovish posture tomorrow.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.105 – 1.111

Update: The crisis in Ukraine is impacting the markets in a substantial way for the first time. Energy prices are up (oil: +2.5%), equity markets are trading down and there is a general push into safer assets. In the currency market, almost all emerging market currencies are impacted, especially the Russian ruble which is down around 10%. Major currencies considered safe-havens like the US dollar and the Japanese yen are trading up. The Canadian dollar is an interesting position. On the one hand, higher oil prices and relative stability would suggest the loonie should be slightly stronger. But as we have seen time and time again in times of geopolitical stability, the flows into the US dollar overwhelm any perceived safety seen in our currency. Making the picture even more murky, raw material and industrial price indices that came out this morning suggest that the disinflation fear is quickly receding, removing the primary rationale for a dovish posture by the Bank of Canada. The net result is that the loonie is weaker by 0.3% relative to last Friday’s close.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.105 – 1.111

Update: And the picture gets murkier… US GDP figures this morning suggested that previous estimates for Q4 GDP growth were well above actual growth. At the same time, Canadian GDP figures for Q4 came in at well above consensus estimates, with consumer spending driving much of the growth. The Canadian dollar strengthened by about half a penny and USDCAD is now trading at 1.108. The narrative that the US economy would outperform the Canadian economy and that the US dollar would get more expensive is still alive but needs closer scrutiny given the recent rash of conflicting data.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.109 – 1.115

Update: Mixed economic data in the US (stronger than expected durable claims and weaker than expected jobs figures) failed to move the Canadian dollar rate and we are essentially flat to last night’s close. We are now waiting for Janet Yellen’s testimony before the Senate as a potential forex catalyst. Tomorrow’s GDP figures in Canada and the US are also potential catalysts. There is a large option expiry on the loonie at 10.00 AM and we expect the loonie to be trading in tight ranges until at least that time.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.106 – 1.112

Update: It is all quiet on the Canadian dollar front with little news and little price movement. The loonie is currently at 1.110 and slightly weaker than last night’s close. But the quiet may come to an end as we get a rash of economic in the next couple of days. Among other things, in Canada and the US, we are expecting GDP figures on Friday. In the US, we also get job figures and other metrics of economic activity tomorrow. This morning, we will also get a look into the health of the real estate market in the US. All of those data points have the potential to move the market.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …

Expected USD/CAD Range: 1.104 – 1.112

Update: The Canadian dollar showed significant strength yesterday and is essentially flat this morning. We continue to think that Friday’s higher than expected inflation figures remain the most recent and relevant economic data point. If disinflation is no longer a fear, the Bank of Canada’s rhetoric with respect to that issue will have to be toned down and an interest rate cut is even more unlikely. We believe that view is now dominant until we get further guidance from either economic data or other external factors. We expect the loonie to remain range bound until further data points clarify the picture.

The Big Picture: The Bank of Canada remains cautiously optimistic on the Canadian economy but dropped its tightening bias in October. Indeed, at the moment, the primary concern of Governor Poloz seems to be inflation rates that are well below the Bank’s 2% target and the …