USD to CAD remains range-bound around 1.256 (CAD to USD at 0.796) as investors await a couple of potentially significant catalysts for exchange rates. First up tomorrow morning will be June inflation in Canada. If inflation registers much higher than expected, it could make it more likely that the Bank of Canada will have to move more aggressively to rein in monetary support and that would push up the loonie. Then, tomorrow afternoon, we get the results of the Federal Reserve meeting and investors will be looking for clues on the policy outlook in the US. To put the importance of this Fed meeting in context, note that the last meeting led to a month long USD rally. So, while no change on interest rates is expected, there is an unusual amount of focus on discussions around bond purchases and the bank’s views on inflation. In the interim, this morning, the picture on economic recovery is getting murkier with US durable goods orders in June coming in below expectations, housing prices hitting record levels in the US, and some commodity prices (eg lumber) continuing to pull back as the surge in demand subsides. Also, concerns about Chinese regulatory reform has stocks retreating modestly from all time highs.
