The Canadian dollar has steadied at around a two-week high against the US dollar. USD to CAD is at 1.260 (CAD to USD at 0.783). The US dollar took a hit on Friday when Fed Chair Powell took a cautious tone in his much-awaited speech. While indicating that tapering of asset purchases could begin later this year, the Chair went out of his way to indicate that rate hikes were still very far away. Oil is flat this morning as Hurricane Ida seems to have largely passed without doing much damage to oil facilities in the Gulf of Mexico. For the Canadian dollar, domestic considerations are likely to come to the fore this week for the first time in a while. First, the election outcome is increasingly uncertain with current polls indicating a toss-up at the moment. A Conservative government would potentially mean a bump in the Canadian dollar as the party is seen as more hawkish on inflation and more restrained on fiscal spending. Second, we will get an indication of the health of Canada’s economy tomorrow when we get GDP figures for the second quarter. Most of the country was in various stages of closure and it will be interesting to see how the economy was impacted during that period. That will set the stage for the Bank of Canada’s statement next week. Much has changed since April the Bank of Canada became the first major central bank to indicate a reduction in monetary stimulus. How the bank approaches those changes will be the most impactful single catalyst on the Canadian dollar exchange rate in the next couple of weeks.
