Updates (2013-2014)

Expected USD/CAD Range: 1.061 – 1.066

Update: This morning, US PPI figures once again confirmed that inflation is not a threat in the United States. In Canada, Governor Poloz yesterday also reaffirmed that in his view the Central Bank’s main challenge at the moment is balancing the threat of disinflation versus containing asset bubbles (in particular in real estate). He steadfastly refused to comment on the value of the Canadian Dollar. All in all, his speech and press conference were more balanced than dovish and the Canadian Dollar reacted by strengthening 20 pips. We are currently trading at 1.064 with little volatility expected between now and the end of the day.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.062 – 1.067

Update: Another eventful day for the Canadian Dollar which is weaker by about the penny since the open of North American Trade this morning. The biggest driver of the move has been a broad-based rally of the US Dollar resulting from stronger than expected retail sales in November. While weekly initial jobless claims were higher than expected, they were quickly dismissed as a statistical anomaly. Along with the series of strong data that we have been receiving from the US over the last couple of weeks, murmurs are now starting to get louder as to the possibility of tapering beginning at the Fed’s final meeting next week. Closer to home, we are awaiting comments from Governor Poloz in the afternoon followed by a press release. Given the recent turn to “dovish street”, the markets are watching closely for any signs as to whether the Bank of Canada is really thinking of a rate cut to tame disinflation.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.060 – 1.065

Update:  The US Dollar is again lower against most majors and flat against the Canadian Dollar at 1.06. The loonie rebounded yesterday throughout the day and is now at its strongest levels since late November. We had been arguing for a short term rebound and now expect the currency to stabilize at these levels for the rest of the year. There is quite a bit of focus on Western Canadian Select prices this morning as that major Canadian export trades at the lowest discount in roughly two months to crude prices. South of the border, Congressional negotiators seem to have agreed on a process for avoiding another budget showdown, though Congress has yet to approve the plan.

The Big Picture:  Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters.  In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.060 – 1.065

Update:  The US Dollar is broadly lower against most majors this morning.  With little economic data on the North American calendar to give the market direction, we are mostly at the mercy of technicals and as we have argued for several days, USDCAD has moved up too far too fast and is in line for mild correction.  We may be seeing the beginning of that correction this morning with the loonie gaining some strength and trading around 1.062.

The Big Picture:  Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters.  In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.064 – 1.068

Update:  The Canadian Dollar is down 20 pips and trading around 1.066.  The loonie seems to have found a level and is range bound for now.  It is a light day on the economic calendar both here and south of the border but at 8:15 this morning housings starts in Canada will give us another indication as to how constrained Governor Poloz may be in his fight against disinflation.  If the housing market continues to dominate the Canadian economic story then the Bank of Canada’s suggestion that it may lower rates and drive the loonie lower to stimulate export growth will become increasingly not credible.  On the other hand, if housing starts are starting to cool (at least relative to expectations) then expect further Canadian Dollar weakness.

The Big Picture:  Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters.  In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.062 – 1.067

Update:  Canadian Dollar sellers seem exhausted for now.  The loonie is down roughly 2% in the last two weeks but seems to have settled down at its current level of 1.0652.  Even the Bank of Canada’s more dovish statement on Wednesday did not move the loonie lower.  We are now waiting for employment figures in the US and Canada at 8:30 as the last economic event of the week.  While we remain bearish on the loonie in the long term (see below), we continue to think that the Canadian Dollar has reached its lows for the rest of the year.

The Big Picture:  Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters.  In fact, the …

Expected USD/CAD Range: 1.065 – 1.070

Update: According to this morning’s data, the US is humming along just fine with manufacturing leading and consumers dragging. GDP grew at 3.6% in Q3 (above consensus of 3.1%) and jobless figures came in slightly below expectations. In Canada, the building permits figure came in at well above expectations and probably heightens the tension between the Bank of Canada’s desire to stimulate export growth without fueling asset bubbles. The Canadian Dollar is flat to yesterday’s close at 1.068.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.062 – 1.068

Update: The day has already been eventful and we are only getting started. One measure of private sector hiring in the US suggested a stronger than expected US employment picture and reignited the debate on the timing of tapering. Canadian International Merchandise Trade for October was well ahead of expectations. The net result was the Canadian Dollar trading slightly weaker at 1.066. All eyes are now on the Bank of Canada and its rate decision later this morning. No rate cuts are expected but there is a minority view that the bank may lean dovish versus the status quo of a neutral stance on cuts.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.062 – 1.068

Update: Sentiment on the Canadian Dollar continues to be decidedly negative. There is now a minority but apparently growing view that Poloz is more dovish than the market had originally realized and that his focus on keeping inflation above the lower end of the stated desired range may lead to an interest rate cut. As a result of this renewed focus on the Bank of Canada, tomorrow’s monthly interest rate announcement is shaping up to be an interesting event. While no change in rates are expected, the Canadian Dollar bears will be looking for affirmation of their view in the text of the release.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …

Expected USD/CAD Range: 1.058 – 1.064

Update: Despite strong GDP figures in Canada on Friday and strong oil prices, the Canadian Dollar traded down on low volumes due to the US holiday. The Loonie is now trading at 1.063, the weakest level in approximately two years. The market is now focused on the heavy schedule of data expected out this week. By the end of the week, we should get a good renewed picture of the strength of the US economy. Here at home, the Bank of Canada’s monthly rate decision is scheduled for Wednesday and is not expected yield any surprises.

The Big Picture: Canada’s new central banker is cautiously optimistic about the economy but shows no inclination towards raising rates in the next several quarters. In fact, the low dollar policy being pursued by the bank suggests …