The US dollar is at its lowest level in three weeks against the Canadian dollar as the economic picture gets murkier. USD to CAD is currently at 1.253 (CAD to USD at 0.798). US job creation for August missed expectations by a wide margin. The US economy added just 235,000 positions, far below the expected number of 720,000 new jobs. That result is pressuring the US dollar this morning as it reinforces the Fed’s dovish message last week. The US jobs miss comes on the heels of a hugely disappointing second quarter GDP number in Canada released earlier in the week. At the same time, one particular engine of Canadian economic growth, housing resale activity, seems to have slowed substantially during August in Toronto. In the meanwhile, most risky asset prices (real estate, stocks, crypto, etc.) continue to trade near or at record levels. So, in Canada, we have had an robust economic recovery that is now possibly stalling, asset prices that are historically high, nagging worries about inflation, and a federal election. With that, the Bank of Canada’s statement next week becomes even more intriguing. The overwhelming consensus is that the Bank will be especially careful not to make any waves at this particular moment. We agree with that view. But with such broad consensus comes the possibility of big volatility if the Bank diverges from the status quo even one bit.
