The shockwave set off on Friday by the impressive Canadian job creation reading helped our currency revisit the highs seen in late September 2017. The consistent strength of our job market combined with other positive domestic economic news has raised the likelihood of a key rate increase on Jan. 17 to more than 83%.
For the moment, the loonie appears to have stabilized, but all signs appear to point to such a context favouring additional gains, making a target of 82.50 cents foreseeable by mid-year. Obviously, many elements are likely to have an impact on that scenario in the meantime, however ,the perspective that we will have to deal with a stronger CAD for some time remains.
The situation is certainly not catastrophic in the United States either, where monetary tightening is also in the forecast. According to market observers, the March 21 key rate decision is favoured for a hike with a 75% probability, with most feeling that the Jan. 31 U.S. Federal Reserve (Fed) meeting is too soon to allow the Fed to properly assess the situation. During this first week of full activity, it may be wise to take a look at your currency risk management strategy.
Stéphane Goulet
Range of the day: 1.2375 – 1.2475