15 December, 2008
Canadian Dollar Forecasts Remain Gloomy on Shaky Fundamentals
A
larger-than-expected Bank of Canada interest rate cut made the Canadian
Dollar one of the worst performing G10 currencies on the week, but an
outright tumble in the US Dollar
left the USD/CAD marginally lower through Friday’s close. BoC officials
surprised markets in lowering interest rates by a sizeable 75 basis
points—signaling that domestic yields will likely fall harder than
previously expected. Dismal economic data out of the US economy
likewise dimmed Canadian economic outlook, and the Loonie continues to lose ground against major global counterparts on worsening fundamentals.
Fundamental Outlook for Canadian Dollar: Bearish- Canadian Dollar tumbles on Bank of Canada interest rate cut
- DailyFX Analysts express theirviews on the Canadian Dollar
Forecasts for further deterioration in Canadian economic conditions will likely keep pressure on the Canadian dollar through the foreseeable future. Whether or not it is able to recover against the US dollar is another matter entirely, however; similarly gloomy outlook for the US economy leaves its currency in a similarly disadvantaged position. Short-term price action in the USD/CAD currency pair may subsequently depend on the trajectory in Crude Oil prices; the 50-day correlation between the USD/CAD and oil prices currently trades at its strongest levels in at least 10 years.
The Canadian economic calendar is otherwise unlikely to spark major moves in the USD/CAD, but traders should watch out for any surprises surrounding the highly-anticipated US Federal Reserve interest rate decision. The US central bank is expected cut interest rates to fresh record-lows in Tuesday announcement; the key question is how low rates can and will go. The ramifications of the rate decision will almost certainly be felt in all US dollar pairs and, importantly for the USD/CAD, in Crude Oil prices. It is difficult to predict how the Canadian dollar will react, but we expect significant volatility out of all US dollar-denominated forex pairs through the week’s price action. - DR
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26 November, 2008
ForexGen | Australian, New Zealand Dollars Gain
Australian, New Zealand Dollars Gain, Outpaced by the Canadian Dollar on Surprisingly Strong Canadian Retail Sales
Moves in the Canadian dollar were a bit more dramatic, though, as the release of Canadian spending figures proved to be much stronger than expected. Indeed, retail sales jumped 1.1 percent in September, nearly three times as much as economists had forecasted. This is something we noted potential for yesterday, given the solid employment numbers we’ve seen over the past three months and 1.5 percent gain in wholesale sales. While this does bode well for Q3 GDP results, the Bank of Canada is still anticipated to cut rates by 25 basis points during their next meeting on December 9, as the financial crisis and economic slowdown in the US threatens to weigh on growth in Canada as well.
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