The Canadian dollar is flat ahead of Chairman Powell’s highly anticipated speech at 10 am this morning. USD to CAD is at 1.269 (CAD to USD at 0.789). The annual Jackson Hole conference in Wyoming is often used by Fed Chairs to make major announcements but it has taken on even more importance than usual this year with investors looking for more details into the central bank’s plans to taper monetary stimulus. Any remarks on the future of the central bank’s massive bond purchase program that is even slightly off of market expectations could move the US to Canadian dollar exchange rate and every other market. Currently, the markets expect those asset purchases to be tapered beginning late this year. One factor that could impact the decision making is inflation. US July inflation came in at a high 4.2% this morning but was near forecasted amounts. Whatever the Fed does will set the stage for the Bank of Canada which will make its own announcement in early September. The Canadian central bank has already cut back asset purchases and has indicated that it could raise rates in 2022. But conditions have changed quite a bit since then. The fourth wave of Covid is now well on its way and the Bank of Canada’s decision will come in the middle of an election where inflation has become somewhat of an issue. In a sign of how focused currency investors are on monetary policy at the moment, the usually oil-sensitive Canadian currency is unchanged despite the fact that oil is up 2% on concerns about short-term supply supply issues resulting from a potential hurricane forecasted to hit on the Gulf of Mexico this weekend.
