USD to CAD is at 1.257 this morning and has been trading at approximately half a penny away from that level in either direction for the last three weeks. This also happens to be our short-term consensus forecast for the Loonie. As we have been pointing out, a lot of what was previously unknown has already been baked into the market and so until there are new macro developments and direction, there will be no big directional move in the exchange rate. For example, we know that the economic recovery is full-steam ahead on both sides of the border. We know that vaccinations are proceeding in both countries (though quite a bit faster in the US). We know that asset prices of all types are at record levels, from Canadian real estate to stocks to bitcoin and so on. What remains to be seen is the specifics of how the economic recovery unfolds and importantly how the central banks respond in response. Will the US Federal Reserve pull back sooner than expected? Will the Bank of Canada move before or after the Fed? Those are the types of questions that investors are asking. The market will hear from Fed Chairman Powell at 11 today and will be watching closely. Also, tomorrow, we will get ADP March employment numbers for Canada and if the number is way off of expectations, that could also move the rate.
