After falling five days in a row to a two-month low the C$ is finding some strength this morning on rising oil prices. The Bank of Canada affirmed yesterday that its policy of raising rates will be under review given Canada’s mixed economic outlook. The C$ is overdue for a rally today, but importers should consider any strength a selling opportunity as the overall trend remains towards weakness.
After yesterday’s pause the US$ is strong again overnight as it continues to test the yearly highs. Labour costs reported this morning continue to rise reflecting continued economic strength. While a US$ pull back is overdue the long-term trend is higher. Any exporters with unneeded US$ might consider a policy keeping them if they can.
The EUR and GBP are both weaker this morning on news that the European Central Bank will keep its rates unchanged for the year and provide cheap funding to its banks to help them recover from defaulting loans. This morning the EUR is testing the lows of three weeks ago, which is likely to provide a short-term buying opportunity, however its hard not to see the EUR eventually making its way to near-parity with the US$ by the end of the year.
- Drummond Gill