Updates (2013-2014)

Expected USD/CAD Range: 1.102 – 1.108

Update: Despite weaker than expected building permit data, the Canadian dollar continues to regain some ground. USDCAD is currently trading at 1.106 and the loonie is now at its strongest level in about two weeks. This most recent move was partially precipitated by weak US employment figures out this morning and we have discussed the broader themes in our updates over the last couple of days. We continue to think that the US dollar has peaked in the short term against the Canadian dollar. Our longer term view (below) continues to be that the US dollar will appreciate moderately over the next 12 months.

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: 1.103 – 1.111

Update: Despite the global turmoil yesterday in the broader markets, the Canadian dollar held steady and has now seemingly settled at the 1.10 to 1.11 range. We identified the reasons for the steadying in yesterday’s report. We continue to think that the US dollar has peaked in the short term against the Canadian dollar. Our longer term view (below) continues to be that the US dollar will appreciate moderately over the next 12 months.

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: The Canadian dollar has been showing some signs of life for the last couple of trading days and is now trading at 1.105. The minor recovery has been due to (a) some strong economic releases (this morning’s Industrial Production release was well ahead of estimates), (b) optimism for the Keystone XL pipeline’s chances of approval based on a State Department release, (c) the rumour that two large US asset managers have terminated their short CAD positions, and (d) a general sense that, for now, the sell-off in the loonie is overdone. We agree with that last sentiment and think that the US dollar has peaked in the short term against the Canadian dollar. Our longer term view (below) continues to be that the US dollar will appreciate moderately over the next 12 months.

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 …

Update: When it comes to the Canadian dollar these days, it is all relative. This morning, GDP came in as expected but the news was irrelevant to the larger market picture as the stronger than expected US consumer spending figures dominated the picture. Not surprisingly, the US dollar continued to trade up broadly, including against the Canadian dollar, which now trades at 1.121, the weakest level since July 2009.

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 …

Update: The Canadian dollar gave up further ground and combined with yesterday’s losses is now at the lowest level it has seen since July 17, 2009. Most of the overnight move can be attributed to overall US dollar strength but the overall sentiment continues to be negative on the loonie. There is no particular catalyst driving the most recent weakness in the loonie other than the broad themes we have been discussing for the last twelve months (and shown below). Fed tapering will continue as expected and US GDP, personal consumption and initial jobless claims all came in as expected this morning. Data out of China continues to confirm a softening manufacturing picture in the world’s second largest economy. The Canadian dollar is currently trading at 1.118.

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 …

Update: This morning, the loonie has regained some of the ground lost yesterday as we approached five year lows and is currently trading at 1.112 against the US dollar. But the news flow dominating foreign exchange markets today is all overseas. The Fed will provide its monthly update along with the size and nature of what is expected to be the latest tranche of the taper at 2 PM. Overnight, the Turkish central bank failed to stem the losses in its currency despite more than doubling interest rates.

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: 1.112 – 1.119

Update: The slide of the Canadian Dollar has continued today after a two day break, despite weaker than expected data out of the US which caused the US currency to give up early morning gains. While some of the move can be attributed to the overnight announcement out of several emerging market banks that they intend to back up their currencies, for the most part the decline in the loonie today is largely technical and flow driven with speculating short CAD flows seemingly dominating 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: 1.103 – 1.110

Update: The reports of the death of the Canadian Dollar due to the dovish stance of our central bank were somewhat exaggerated! We are now down only 80 pips from prior to the Bank of Canada announcement on Wednesday with the loonie regaining some strength after stronger than expected retail sales figures (and probably because the selloff was overdone). The focus is no longer on domestic factors in Canada and international developments are dominating. In particular, much attention is being paid to the sell-off in emerging markets.

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: Some perspective in the face of relentless media coverage of the fortunes of the Canadian Dollar; we are now down 11% in the last 12 months, 5% since the beginning of 2014, and down 1% since the latest Bank of Canada announcement on Wednesday morning. Yes, those are significant moves in a short period of time but as usual, the media coverage is off base. While the most recent move has received wall to wall coverage, the longer term trend received no attention while it was happening. We have been arguing for a lower Canadian Dollar for the last 12 months and continue to believe the loonie will trade lower by the end of 2014 but believe it will continue to happen in a gradual manner as it has for the last 12 months.

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: On a scale of 1 to 10 where 1 was status quo and 10 was a very dovish statement, yesterday’s Bank of Canada announcement was a 7. We were expecting a 5 and clearly the market was surprised as well given the Canadian dollar’s violent negative reaction. Adding to the surprise was the Bank’s reference to the value of the Canadian dollar as still being an impediment to competitiveness in the quarterly Monetary Policy Review. The loonie traded down nearly a penny immediately and is now trading at 1.110. Overnight it traded as weak as 1.115. Strong retail sales in Canada out this morning caused a retracing of some of the loonie’s losses and there is significant attention focused on tomorrow’s inflation data, especially given the renewed focus brought to disinflation fears by yesterday’s Bank of Canada 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 …