Forex Investment and Currency Trading

USD/CAD just doesn’t seem to want to head higher; after a much weaker than expected retail sales report yesterday morning funds initially shot sharply higher, but were met with selling interest above 1.07, and couldn’t manage to stick up there for long. The overnight session was very quiet, and we remained in a tight 1.0665/1.0695 range for a large majority of the Asian session and London morning.

We’ve seen all sorts of Bank of Canada news over the last 24 hours. Yesterday afternoon the BoC announced that “Reflecting the improved conditions in funding markets, as evidenced by lower market-based funding costs and the lack of coverage in recent auctions for temporary liquidity facilities,” it has decided to let the Term PRA for Private Sector Instruments and the Term Loan Facility expire at the end of October. On the margin, this is a CAD-positive development, since it not only shows the extent of the improvement in Canadian credit markets, but it also further reduces the odds of quantitative easing going forward, as QE would only be brought to light if there were severe market dislocations. Governor Carney also spoke last night, in a short interview with CBC Newsworld. He repeated the refrain that we’ve heard ahead of the G20 – that the economy is only growing right now because of the huge amount of fiscal and monetary stimulus, and that the recovery is not yet self-sustaining. It’s notable that Carney did not mention the Canadian dollar, despite the fact that USD/CAD has recently made new lows. And lastly, Deputy Governor Longworth spoke this morning, but merely repeated what the BoC said in its 10 September statement, including that “persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target.” So nothing new on CAD from him either. For the rest of the day, with no Canadian data until next week, we’ll be watching today’s FOMC announcement for direction. This morning should be pretty quiet in anticipation of the Fed.