The Canadian dollar ended yesterday at its lowest level since mid August as we saw a significant selloff in tech stocks, energy and other commodities. This morning, the Loonie has regained some ground and bounced 0.3% as equity markets have stabilized for the moment. USD/CAD traders are focused on the Bank of Canada’s interest rate decision to be released later this morning. While no changes to the Bank’s policy are expected, it will be interesting to read the Bank’s commentary (as well as Governor Macklem’s speech tomorrow) as an indication of the size scope and timing of the Bank’s ongoing asset purchase programs. No one expects higher rates any time soon but will the Bank adjust its quantitative easing effort in any meaningful way? If there is a discussion of an eventual reduction in quantitative easing, we expect the Loonie to trade up. On the other hand, if we get a renewed selloff in equities, expect the Loonie to continue to trade down.
