The Bank of Canada acknowledged the strong economic recovery but gave no hints as to when it might begin slowing down the pace of bond purchases or consider raising rates. That was the status quo and it was what the market expected and therefore USD to CAD did not move in response to the statement yesterday. Nevertheless, the Canadian dollar is now trading at near multi-year highs again and that has nothing to do with domestic factors and everything to do with US dollar weakness resulting from a fast rising stock market and stabilizing bond yields. Equities have been flirting with record levels over the last couple of days as strong economic recovery combines with accommodative central banks and the largest fiscal stimulus the US has ever seen. Short of something entirely surprising, it is hard to see what might disturb these conditions or the market’s optimism for the next couple of weeks.
