The USD rose against most currencies, as this morning’s economic data continues to show a growing US economy. Traders and analysts are now waiting for the Fed’s comments at next week’s meeting. Expectations of a rate hike are more certain than before, leaving the Canadian dollar in a weaker position. This week’s comments by the Bank of Canada has sent the USDCAD over 1.3040, and it would seem that a weaker Canadian dollar is what the BoC wants. The BoC is worried that the Canadian economy still needs a boost in order to take up the slack that the BoC believes to be out there.
Expect further weakness in the near term.
USDCAD 1.2955, 1.2950, 1.2906 1.3057, 1.3075, 1.3100
USD-CAD has this week lifted to the mid-to-upper 1.29s from lows near 1.2800. BoC Governor Poloz said on Tuesday that the unwinding of monetary stimulus would “remain cautious,” which along with softer oil prices, have pushed the Canadian dollar lower. Reports that Trump will expand his tariff list is also a potential bearish consideration for the Loonie. We also anticipate that upcoming Canadian data releases will be consistent with the BoC’s slow-go approach to policy normalization. Manufacturing shipments (due Friday) are expected to fall 1.0% in January (m/m, sa) after the 0.3% dip in December, with our projection driven by the 2.1% tumble in export values revealed in the January trade report. Q4 net worth (up today) will be closely watched as the report contains the debt-to-disposable income ratio. The ratio saw a record high 171.1% in Q3, and could move even higher in Q4 to underpin the elevated degree of sensitivity household have to higher interest rates. USD-CAD technically remains in an uptrend, which has been in play since late January. Trend support comes in at 1.2830..