Updates (2013-2014)

Expected USD/CAD Range: 1.042 – 1.047

Update: Canadian Dollar weakness continues in response to Wednesday’s surprise announcement by the Bank of Canada. The loonie, now trading at 1.044 is the weakest performing major in the last few days and is down 1.36% this week alone. We believe that the selling has subsided and that the loonie will hold these levels in the short term.

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: 1.037 – 1.043

Update: In a major surprise to the Canadian financial markets, the Bank of Canada took its already mild hawkish bias on interest rates to a completely neutral stance. The theoretical implication is that the next interest rate move is as likely to be down as it is up. Practically, the change means that an interest rate increase is even further away than previously anticipated. The change is in line with what we have long argued is likely to be the new focus of the bank on exports under Governor Poloz (see our foreshadowing of this move here). There were other changes to the bank’s stance, including a downward revision of growth estimates but these other changes were previously telegraphed by various bank officials.

The markets reacted immediately with the loonie now trading at 1.041 and up over a penny since yesterday morning. We continue to believe that the Canadian Dollar will be even weaker by year end.

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: 1.030 – 1.035

Update: As we head into the monthly announcement by the Bank of Canada this morning, the Canadian Dollar is trading at its lowest level in about a week at 1.032. The loonie is down along with its commodity sisters as investors fret over news out of China suggesting that there may be an interest rate raise forthcoming from that country’s central bank. The expectation is that little news will come out of the Bank of Canada release and news conference as both the expected downgrade in growth forecasts as well as the bank’s likely policy statement have been telegraphed and priced into the market. We expect continued US Dollar strength 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: 1.027 – 1.033

Update: The first major data point since the US government reopened (September nonfarm payroll) was a significant disappointment coming in at 148K versus the consensus expectation of 180K. All asset classes reacted and the US dollar weakened across the board including against the Canadian Dollar. But the loonie quickly gave up its gains and we are now back at the 1.030 level. Retail sales ex-autos in Canada came in above expectations but with all the focus on the US employment situation and its impact on the timing of tapering by the Fed, the loonie got very little lift from that positive domestic news.

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 – 1.032

Update: The Canadian Dollar is mildly weaker against its US counterpart today and trading at 1.030. August wholesale sales data in Canada were up 0.5% and stronger than the consensus of 0.3% but weaker oil prices have been holding the Loonie down this morning. The markets are focused on Wednesday’s Bank of Canada policy report as well Tuesday’s unemployment release in the US.

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 – 1.034

Update: The Canadian Dollar is flat to yesterday’s North American close at 1.029. Figures released this morning in Canada reaffirm that inflationary pressures are tame and far from the top range of the Bank of Canada’s target. The US Dollar continues to be weak across the board as the repercussions of the shutdown are becoming apparent with the main impact in the currency exchange market being the newly emerging consensus that tapering of the monetary stimulus programs may not begin until 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: 1.028 – 1.035

Update: The US debt ceiling has been raised and the government has been reopened. The Canadian Dollar is trading at a one week high at 1.031. In fact the US Dollar is weaker against all major currencies as the extended standoff in Washington has pushed consensus expectations as to the timing of tapering by the Fed to 2014. We tend to agree with that consensus. Now, the focus returns to economic data and the strength of the economy both here in Canada as well as the US. The debt ceiling debate will be revisited after the holidays at which point the dynamics will be entirely different.

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: 1.034– 1.038

Update: The US Senate seems to be getting close to a deal that would end the shutdown and extend the debt ceiling for the next several months. It is unclear how such a deal would be received in the House and there is, in our opinion, every chance that there will be a market scare before this is resolved. Regardless, equity markets have reacted positively as have all “risk assets” such as the Canadian Dollar which is now trading at 1.036.

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: 1.037– 1.042

Update: The Canadian economy created 11,900 jobs last month, topping forecasts. The unemployment rate fell to 6.9%. The loonie reacted by gaining 15 pips but then almost immediately gave up the gains as the market refocused on developments out of Washington. The loonie is trading at 1.039 and “shutdown watch” continues.

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: 1.035– 1.040

Update: The outlines of a compromise between President Obama and the House seem to be coming into focus with a short term extension of the debt ceiling and an end to the shutdown. Weekly jobless claims in the United States came in higher than expected. In Canada, new housing prices rose 0.1% last month and 1.6% over the last year. All in all the Canadian Dollar is roughly flat at 1.039.

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