Yesterday, we identified several risks on the horizon for the Canadian dollar and suggested that the next leg in the Loonie would likely be down and not up. Today, one of those risks has come to the fore and has pushed the Canadian dollar down 1% against USD. In particular, there is growing concern about frothiness in stocks, with the latest sign being the parabolic increases in heavily shorted names like GameStop which are being bought up by retail investors. Further adding to the concern about stock prices is the fact that other than large tech and financial names, most other companies seem to be reporting disappointing results for the fourth quarter of 2020. All of that has led to a modest sell-off in stocks which in turn has pushed up the US dollar. Another risk that we identified yesterday was the Fed would begin signaling “tapering” or a pullback on its monthly bond purchases more quickly than the Bank of Canada. That risk will be in focus for this afternoon when the Fed releases its monthly interest decision followed by a news conference by Chairman Powell.
Account to Account