The Canadian dollar is unchanged this morning after a week which saw it trade up to 3-year highs in response to a very dovish Fed statement, before giving up some of that ground as long term bond yields started moving up towards the end of the week. Where we are now is that the Canadian dollar is 1.5 pennies away from the earlier 3-year highs but still at the higher end of the range in which it has been trading all year. There are few economic data points this week which could seriously move the market so the focus will be on bond yields (the higher they go, the lower the Canadian dollar) and oil prices. In Canada, the discussion around a hot housing market and the impact that it may have on the Bank of Canada’s decision making process is once again percolating. We do not expect the Bank of Canada to react prematurely to pull back stimulus in response to housing prices but certainly it is an area to watch. The decline of the Turkish Lira in response to the sudden removal of the country’s central banker is stoking some fear of a contagion in emerging markets but is unlikely to impact USD to CAD.
