- We’ve seen USD/CAD continue to drift lower on USD weakness, although the Canadian dollar has underperformed against most of the other majors since Tuesday’s FOMC announcement. The move in EUR/CAD has been particularly impressive, as we’re now about 6 big figures higher than we were at the start of the week, despite no major data to influence the Canadian outlook.
- Bank of Canada Governor Carney’s speech yesterday afternoon didn’t directly address the outlook for interest rates or the economy. However, it’s worth mentioning that Carney spent
a lot of time, in both his speech and the question and answer periods that followed, emphasizing that the Canadian financial system is much stronger than that of other regions, and that the BoC’s rate cuts are indeed getting through to the broader economy. With the markets questioning which central bank(s) will be next to join the Fed in the QE club, it appears that the BoC is an unlikely candidate. QE is a policy that’s generally employed only when the financial system is gummed up, and there truly is no other solution to kick-start the economy. But that is not the case in Canada, since interest rate cuts are still having a positive effect. And since the BoC started cutting rates before most other central banks, the first of those rate cuts
should start to be fully felt in 2009. - The important issue for the Canadian dollar this week will be tomorrow’s CPI report.
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December 18th, 2008 · No Comments
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