The budgetary update yesterday forecasted a larger deficit ($340 billion) for the current fiscal year than was expected ($250 to $300 billion). While fiscal conditions are important to watch for the long term, the Canadian dollar is not currently trading on the specifics of the debt/deficit numbers and as expected did not react to the news. The Canadian dollar continues to be most correlated on a day to day basis by overall global risk sentiment. Yesterday, CAD gained about 0.75% throughout the day as the US dollar traded down broadly. The US dollar is now trading at the lower end of the range that it has held for the last month or so against the Canadian dollar. This morning the exchange rate is unchanged from yesterday’s close. In general, the themes continues to be the same: the economic picture is mixed, financial asset prices have fully recovered, and the health picture is good in Canada but terrible in the US.
