The USD to CAD exchange rate is flat as the markets start the week on a steady note, with stocks mixed and oil prices unchanged from Friday’s close. The Canadian dollar has fluctuated quite a bit this January but has ended up right where it was trading in at the beginning of the month. There are no major macro themes animating the markets right now and that makes for volatile but directionless trading. US political risk is largely behind us (the size of the stimulus package remains an issue) and while the pandemic rages on, its rough contours are priced into the market with consensus on return to something resembling “normalcy” sometime in late summer or fall in much of the developed world. In Canada, the Bank of Canada is increasingly registering its concern about the strength of the Canadian dollar but remains powerless to do anything about it given other more important considerations relative to the economic recovery. The one thing that remains murky is the shape of the economic recovery and the reaction of governments and central banks to that recovery. But those are factors that will take time to become clear. In the meanwhile, until new macro themes emerge, we continue to expect the Loonie to fluctuate a lot but ultimately not move very much.
