Friday January 18th, 2019

CAD dropped sharply yesterday to almost 0.75 cents in the morning then rallied equally strongly in the afternoon. In keeping with a US Fed theme, business leaders are expecting a reassessment in Bank of Canada policy of rate hikes. Oil prices were also weak in the morning and surprisingly strong in the afternoon. These trends have continued into this mornings’ markets along with a continued stock market recovery. There has been no negative trade “Sabre rattling” recently, which means there might be hope for a better trade outlook.

Canada will announce its annual inflation rate this morning, which should be a modest 1.7%; well below the US rate of 2.5%. Since the 2008 recession Canadian inflation has ranged between 0.5%-3.25%, so there should be no incentive for the Bank of Canada to raise rates currently.  US Capacity Utilization and Industrial Production numbers will also be announced. Expectations are 78.5% and 3.9% respectively. These numbers have been trending higher over the last 2 years, so any drop could send the US Dollar Index lower.

As for Brexit, Prime Minister May will be holding talks with her Cabinet and EU leaders over the weekend to discuss proposals for a smooth transition.