GOOD PERFORMANCE FROM THE CANADIAN DOLLAR
For the past two months, the loonie has been, by far, the top-performing G10 currency against the greenback, rising more than 7%. Could this trend continue? A number of indicators appear to point to the bulk of the movement being behind us:
- Canadian inflation remains well below the official target from the Bank of Canada (BoC)
- Risks related to renegotiating NAFTA
- Speculators betting against the CAD have already closed their positions
- The U.S. dollar could also rally if the market starts to anticipate another rate hike by the end of the year
So, should we expect a return toward 1.3000 in the next few weeks? Considering recent comments from the BoC to the effect that another key rate increase remains possible in 2017, it could be tough. Taking advantage of CAD weaknesses via market orders appears to be an attractive strategy. Remember that it is always difficult to go against a central bank, as they are likely to get the last word.
Julien Duquette
Range of the day: 1.2550 – 1.2655