Updates (2013-2014)

Expected USD/CAD Range: 1.027 – 1.033

Update: The week has generally been quiet for the Canadian Dollar with the loonie roughly flat to yesterday’s levels at 1.030. Currency traders are focused in the near term on the possibility of a government shutdown in the US resulting from the battle over funding Obamacare and increasing the debt ceiling. We expect a compromise to be formulated in the next several days. A measure of new home sales in the US is scheduled to be release at 10 this morning and there is also significant attention focused on US initial jobless claims and GDP figures coming out tomorrow. Collectively, these data points will provide the first substantial look at the US economy since the Fed’s no-taper decision last week and will go a long way in impacting market expectations with respect to the possibility of tapering in the remaining months of 2014.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …

Expected USD/CAD Range: 1.027 – 1.033

Update: Better than expected July retail sales figures in Canada firmed up the Canadian Dollar earlier this morning. But the loonie almost immediately gave up its gains on weaker oil prices and is now trading roughly flat to yesterday’s levels at around 1.030. The USD is stronger against most other major currencies and there is quite a bit of focus on the schedule of Fed speakers this week as the market continues to seek clarity on the status of future tapering decisions by the Fed. We continue to think that the Canadian Dollar will remain at these levels for the near future.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …

Expected USD/CAD Range: 1.027 – 1.033

Update: The Canadian Dollar has now given up almost all of the gains made since Wednesday’s surprise Fed announcement that there would be no immediate tapering of QE3. The loonie is now trading right around 1.030. Overnight, there was a strong reading on a measure of Chinese manufacturing which along with other factors has some believing that China is experiencing a rebound from the first half’s slowdown. The impact on the Canadian Dollar was minimal and fleeting. Also, it has become clear that Chancellor Merkel will be back in Germany for another four years (though the exact makeup of her coalition remains to be determined). That fact firmed up the Euro but EURUSD is right back at Friday’s levels.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …

Expected USD/CAD Range: 1.020 – 1.030

Update: Wow! In a major surprise to the markets, the FOMC decided not to” taper” in September and kept to the status quo on its two major bond buying programs known as QE3. The Fed effectively got cold feet and pointed to the mixed data on employment and economic activity as well as the possibility of further fiscal uncertainty to justify its decision. Future tapering may or may not occur this year depending on the strength of the data. In reaction, the equity markets rallied and the USD plummeted across the board and closed down nearly 0.8% at 1.022 against the CAD.

Also yesterday, Bank of Canada Governor Stephen Poloz spoke in Vancouver and painted a fairly optimistic picture of the Canadian economy. He expressed comfort with the real estate market and reiterated the 2% inflation figure as “sacrosanct.” He provided no new information that could move market expectations as to the timing of a rate raise.

For USDCAD traders, we are essentially back to where we started our taper watch a few months ago; analyzing data for clues as to the relative economic strength of the US and Canada.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …

Expected USD/CAD Range: 1.024 – 1.044

Update: The big day is finally here. Today, the United States Federal Reserve announces its decision as to whether it will begin cutting back (“tapering”) the size of the bond purchase program popularly known as QE3. The Fed’s actions with respect to QE3, which has been holding down long term interest rates, will also be read by the market as a clue to when the Fed intends to raise rates once this extraordinary monetary stimulus is wound down.

There are a variety of factors to consider when determining the likely impact of the decision on markets. First, if the taper is not announced and delayed, expect a massive rally in equity markets and a significant decline in the US Dollar by at least one hundred basis points. Second, if the size of the taper is larger than the consensus $10-15 billion, then expect a bad day for equities and a rally in the US Dollar. Finally, the market will also be …

Expected USD/CAD Range: 1.027 – 1.034

Update:  The Canadian Dollar is trading at 1.032, slightly stronger than yesterday’s close.  The Loonie benefitted from stronger than expected Canadian manufacturing sales figures this morning.  The focus continues to be on the much anticipated Fed decision tomorrow afternoon as to the timing and magnitude of “tapering”.  One survey of economist found a median expected reduction of $10 billion in bond purchases to be announced tomorrow.  We continue to think that the intense focus on the details of the Fed decision is misguided and misses the bigger picture.  The era of easy money is over and whether the beginning of the end comes tomorrow or in October is largely irrelevant as markets have already adjusted to expectation of a reduction in bond purchases as well as a medium term increase in interest rates.

The Big Picture:  The commodity boom has seemingly ended (or is at least sputtering).  Relatedly, Chinese and other emerging market economies…

Expected USD/CAD Range: 1.027 – 1.034

Update: The US Dollar is weaker across the board as a result of the announcement yesterday that Larry Summers, the previously favourite choice to replace Ben Bernanke, has withdrawn himself from consideration. Compared with Janet Yellen, now viewed as the most likely choice, Summers was considered the more hawkish candidate. All markets immediately reacted to the news with US treasuries yields trading down and equity futures up. The Loonie gained 0.5% and currently trading at the 1.030 level. The market was already expecting a big news week with the much anticipated Fed decision on tapering in September expected on Wednesday. Most market participants still expect tapering to begin in September but a recent rash of somewhat mixed economic data out of the US has muddied the probability of that outcome for most investors.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies…

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 …

Expected USD/CAD Range: 1.032 – 1.039

Update: The Canadian Dollar is slightly stronger this morning at around 1.034 and just around its 100 day moving average. The US President postponed military action against Syria indefinitely by asking Congress not to hold a vote on the issue until further notice. The market is now almost entirely focused on Friday’s jobless claims numbers out of the US and what those numbers may say about September tapering by the Fed.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …

Expected USD/CAD Range: 1.032 – 1.039

Update: The possibility of a diplomatic solution in Syria has repriced risk in the market and helped all the so called “risk currencies”, including the Canadian Dollar. That sentiment was complemented with still more positive data out of China. The loonie is now trading at 1.035. With the possibility of Syrian military action now on the backburner, the market is likely to get refocused on economic data. Market participants will be dissecting every release for what it says about the strength of the US economy and the nature and magnitude of the Fed’s tapering response later this month.

The Big Picture: The commodity boom has seemingly ended (or is at least sputtering). Relatedly, Chinese and other emerging market economies have …