The C$ continues its decline overnight to a 2-month low while awaiting news of the Bank of Canada’s interest rate decision this afternoon. The BoC is expected to keep rates unchanged with an easing bias. With a government in turmoil over ethics investigations, a weak economic outlook and potentially lower interest rates the C$ appears to be rapidly heading to the six-year lows last seen in December. Any C$ strength today or tomorrow should be short-lived and might be a good hedging/selling opportunity for Canadian importers.
While economic numbers remain weak or mixed everywhere, enduring employment strength in North America is the one figure that explains the continued strength in the US$. In the last four months the US$ has repeatedly tried to break into new highs. Last night was the fifth time, but it won’t happen today. This afternoon the Fed will publish its economic outlook (The Beige Book) gleaned from myriad sources and the market will await that news providing any sellers of US$ an opportunity today in a quiet market.
The EUR is once again testing the lows on its way to even lower levels. Political and economic issues with little hope of a quick resolution continue to plague Europe and are driving EUR lower. The C$ is weakening faster than EUR which is a trend that will continue. Canadian firms importing from Europe along American exporters to Europe should consider hedging/selling EUR on any strength.
- Drummond Gill