Updates (2013-2014)

Expected USD/CAD Range: 1.106 – 1.112

Update: The Canadian dollar is slightly stronger relative to Friday’s close. 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. The bears would argue that Friday’s dismal retail sales figures suggest a weak Canadian economy and therefore compel the Bank of Canada to remain dovish. That logic was largely dismissed by the markets on Friday as the retail figures were viewed as weather-related. 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 …

Expected USD/CAD Range: 1.110 – 1.118

Update: The Canadian dollar is lower this morning relative to yesterday’s close but well ahead of the lows earlier this morning. The loonie troughed early in the morning on the back of global macro concerns and as traders positioned ahead of the morning’s important data points. Sellers of the loonie however were disappointed because while Canadian monthly retail sales came in below expectations the markets were much more on inflation figures and what they may say about the possibility of disinflation on which the Bank of Canada has recently been focused. Those figures came in above expectations reducing the probability of a rate cut. The loonie strengthened as a result and is currently trading at 1.114.

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: 1.102 – 1.110

Update: A variety of factors have converged in the last several days to drive the Canadian dollar lower. Yesterday morning we had lower than expected wholesale figures as well as technical supply of Canadian dollars having to do with an announced M&A transaction. Then later in the afternoon, the December Fed minutes were released indicating that hawkish members may begin arguing for interest rates hikes sooner than expected. This morning, we are seeing a general aversion to risk assets, including the commodity currencies, due to geopolitical risk, especially events in the Ukraine. All of that has caused a decline in the Canadian dollar of roughly 2% this week. Domestically, loonie traders are very much focused on tomorrow’s inflation data, which given the focus of the Bank of Canada on the risks of disinflation, will be the week’s main event.

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: 1.097 – 1.104

Update: Canadian wholesale sales recorded the biggest decline in six months in December. While the decline was being attributed to unusually harsh weather conditions (especially in Eastern Canada), the Canadian dollar reacted negatively and fairly quickly gave up half a penny. South of the border, housing starts came in below expectations and again weather was being blamed. More interestingly, inflation figures seem to indicate that our large southern neighbor is not experiencing disinflation which may portend an interesting result on Friday as we receive Canadian inflation figures.

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: 1.094 – 1.102

Update: It is a quiet day for the Canadian Dollar and we open the shortened week basically where we closed on Friday at around 1.097. The Canadian dollar bears seem to be in hibernation and the market is awaiting further news as to the relative strength of the US and Canadian economy before giving direction to the value of the loonie. We expect to hold this general level until later this week when we begin to receive substantive economic data from the United States.

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: 1.097 – 1.105

Update: Reality continues to intrude on the hysteria about the demise of the Canadian dollar which characterized the first few weeks of the year. The Canadian federal government is on the cusp of a budget surplus, commodity prices are showing strength and the economy continues to show surprising strength. At the same time, the US economic data continues to disappoint and the taper is now more than priced into the markets. As we have been arguing for the last week, these levels are where the loonie will be for the near future. For our longer term view, see below.

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: 1.096 – 1.102

Update: The tide of Canadian dollar weakness has stopped for now and even receded some. That’s probably because while the selloff was justified (see “The Big Picture” below), it was overdone. It is also because the news flow has been going in the opposite direction for the last week or so. Last night, Chinese trade data suggested a much stronger market for exports than had been anticipated. Prior to that we have had mixed to weak economic signals out of the United States relative to somewhat strong results in Canada. All of that has caused the loonie to regain some life and we are now trading below 1.100, for the first time in about three weeks.

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: 1.102 – 1.109

Update: The 1.105 level seems to be the new short term equilibrium for the Canadian dollar. Janet Yellen provides congressional testimony for the first time as Fed Chair and that is the only potential market mover. Few surprises are expected as Yellen will likely reiterate that the taper will continue if the data continues as expected. Closer to home the federal government’s budget also will likely contain little in terms of surprises to the currency markets with the government expected to project a budget surplus by 2015.

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: 1.102 – 1.109

Update: Friday was an interesting day as the much awaited jobs figures in the US and Canada surprised on both fronts: Canada surprised to the upside and the US was a major disappointment. The resulting impact on the currency markets however was not at all surprising as the Canadian dollar moved to its strongest levels since January 22. This morning we are at 1.105 as the loonie seems to have found some measure of stability at these levels. We expect these levels to hold generally until there is further news.

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: 1.108 – 1.114

Update: Earlier this morning, the Canadian dollar was flat to yesterday’s close reflecting the offsetting effects of stabilizing equity prices and higher energy prices as well as stronger than expected jobs numbers from the US. But that balance was disturbed after another massively negative surprise in the form of the Canadian December merchandise trade deficit. The trade deficit for November was also revised higher. Lower energy exports were blamed. USDCAD is currently at 1.110. The ECB, in a widely expected decision, decided to leave rates unchanged despite fears of deflation.

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 …