Expected USD/CAD Range: 1.066 – 1.073

Update: The Canadian Dollar is now down nearly one percent for the year. The move is a result of (a) the overall strength of the US Dollar, (b) Finance Ministry Flaherty’s comments to the effect that Governor Poloz has predicted a “softer” Canadian Dollar, and (c) this morning’s trade data which showed that for Canada’s merchandise trade position was at a larger deficit than forecast for November and estimated for October.

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: 1.063 – 1.070

Update: Finance Minister Jim Flaherty cued up the year for us with this on a Sunday television show: “The governor [Poloz] was with us recently with the provincial ministers and he indicated there might be some softening in the dollar… but the dollar in the nineties somewhere is good for manufacturing.” That combined with overall US Dollar strength has the loonie trading weaker and around 1.068 last. Our core thesis remains unchanged (see below). We continue to see a gradually weakening loonie with an outside possibility of a sharp reversal on any unexpected news given the universal sentiment in favour of a weaker loonie.

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: 1.059 – 1.065

Update: The weather is cold, the trading is thin and the news is slow but the main theme of the year for the Canadian Dollar and the Canadian economy has already taken shape. How does Governor Poloz balance the risks of disinflation against those of asset inflation, especially in the real estate markets? At the moment, the Governor seems more focused on fighting off disinflation and therefore the markets are bearish on the Canadian Dollar. The recent volatility resulting from the lack of liquidity in the holiday trading sessions notwithstanding, we expect the Canadian Dollar to begin trading closer to 1.070 than to 1.060 next week. We are currently at 1.062.

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: 1.061 – 1.069

Update: 2014 welcomes us with a deluge of worldwide economic data. First, Chinese manufacturing data for December came in softer than expected. Weekly US initial jobless claims came in below expectations but were revised up for the prior week. ISM Manufacturing and US construction spending will be out at 10. The Canadian Dollar is basically flat to last year’s close and volumes remain depressed given the holiday schedule. The overwhelming sentiment in the market continues to be for a weaker loonie in 2014 with tapering continuing to be a main theme in the forex 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 …