The US dollar continues to grind lower against most major currencies and is down 0.2% against the Canadian dollar this morning. The Loonie continues to trade very near 2.5 year highs. Globally, the approval of the Pfizer vaccine and the beginning of the mass vaccination process in the US are on the agenda today. Also, the long-awaited US fiscal stimulus seems closer now than it has been at any time since the end of the US election. In Canada, all eyes are the Central Bank. While the Bank of Canada is not expected to change rates in either direction, its actions with respect to existing (or new) monetary stimulus programs, as well as the wording of its release, could very well move the market. In particular, the Bank typically references the Canadian dollar in its releases and the exact wording around the Loonie will be under heavy scrutiny given recent USD weakness. Needless to say that a much higher Canadian dollar would impede economic recovery. From the Bank of Canada’s perspective, we are likely not at worrisome levels for the Canadian dollar. But, we think that the risks today to the Loonie are to the downside as there is nearly no chance that the bank will do something that will push the Loonie up but some chance that it will say something that pushes it down.
