Expected USD/CAD Range: 1.042 – 1.047

Update: The Canadian Dollar is flat to last week’s close this morning at 1.044. The focus this week is on the FOMC announcement expected on Wednesday. While the announcement is unlikely to make much news, market participants will be looking for clues to the US central bank’s inclinations as to the timing and nature of any future pullback of the existing monetary stimulus programs. We expect the Canadian Dollar to see some technical strength this week after the significant sell-off last week and would encourage US Dollar sellers to take advantage of the current levels.

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: 1.042 – 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 …