The Canadian dollar is ploughing further into multi-year highs as economic confidence, rising stock markets, and assurances about accommodative monetary and fiscal policy continue to pummel the US dollar. The Loonie is a proxy for risk appetite and it is no coincidence that stocks closed at record levels yesterday while the Canadian dollar reached new highs. Oil is also providing a tailwind for the Canadian dollar as the key Canadian export tests new multi-year highs on the back of expectations for an accelerated global recovery and higher demand. The catalyst for the most recent moves has been Powell’s testimony before Congress on Tuesday, where he seemingly rejected recent inflation fears and laid out a plan for retaining the status quo of stimulative monetary policy for the near future. Tiff Macklem spoke on Tuesday as well and he also sounded dovish (though less so) but the nuance of what he seemed to be communicating has been overwhelmed by US dollar sellers. We expect the USD to CAD rate to continue to be volatile as it has been all week.
