The C$ declined further overnight touching six-week lows on news of yet another Cabinet resignation and poor economic numbers that might force the Bank of Canada to lower interest rates. While rates are currently at a modest 1.75% the BoC has raised rates consistently over the last year, so any lowering would signal to the market that the BoC is very concerned about the economy which will weaken the C$ further. Today look for a temporary rebound in a longer term down trend as oil prices and base metals are holding up well.
The US$ tried to extend its rally overnight but appears weak this morning on news of sharply lower construction spending. While the Administration appears to be completing its trade agreement with China late this month there are rumors that India will be the next country up for a trade review. The US$ will likely weaken today within a long-term uptrend.
The European Central Bank has a policy meeting on Thursday and is expected to pump money into the system to help the economy now that Italy is officially in recession. China has also announced a lower growth forecast for its economy amid slumping real estate prices. The EUR has weakened over the last three days but look for a bit of strength leading up to the ECB policy announcement on Thursday.
Key Economic Numbers: Forecast Previous
US Redbook – Yearly (Mar) – 5.2%
US New Home Sales – Monthly (Dec) -10% +16.9%
US Non-Manufacturing PMI (Feb) 56 56.7
- Drummond Gill