Canada’s economy contracted by 39% in the second quarter, suffering its biggest drop on record. The drop was widely expected given the shutdowns and recent data suggests that recovery is well on its way. But the news that continues to shake the fx markets is the reframing of the Fed’s inflation mandate announced yesterday, a track that is likely to be followed by other central banks. In effect, the US central bank restated its inflation fighting mandate at a level higher than 2%, which will require extremely accommodating monetary policy for the foreseeable future. The USD index is down 0.6% but the Canadian dollar is underperforming and is up only 0.3% against USD. The Loonie is now at its highest levels since mid February.
