The Canadian dollar has now given up all the gains it had made earlier in the week in response to the Bank of Canada’s optimistic outlook on the prospects for economic recovery. The Loonie is down 0.5% this morning and right back to where it started the week. The move away from the Canadian dollar to the US dollar comes as stocks retreat from record levels. The decline in risk sentiment in the overall markets is being attributed to a reevaluation of whether Biden will be able to pass his 1.9 trillion dollar stimulus package in light of mounting opposition in Congress. There is also a sense that vaccine optimism has gone too far given the currently grim situation in many parts of the world. With the Loonie now back to where it started the year, we continue to reiterate our view that the for the near-future, expect the USD to CAD exchange rate to be volatile but directionless. That is, we expect a lot of fluctuations from day to day but not a lot of lasting movement until there is further evidence about the economic picture.
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