Week in FX Americas – Investors Expect Better Levels To Own The Loonie

The loonie fell to a fresh seven-month low against the US, its largest trading partner, after Friday’s disappointing December retail sales print (–2.1%) and a soft January inflation report (+0.1%) stoked investor concerns about the health of the Canadian economy.

Canadian core-inflation at +1%, y/y, is well below the Bank of Canada’s medium term target of +2%. Along with other recent data, it’s beginning to point to a prolonged soft patch for the country with the commodity sensitive currency. With inflation numbers like this there is no reason for Canadian policy makers to consider moving its policy rate anytime soon. The futures market is now pricing in a no rate change as far out as the middle of 2014.

Disappointing domestic data has convinced some of the Canadian corporates to reconsider moving some of their demand orders for the loonie, while the required dollar buyers are beginning to chase this market higher by shifting their buy orders up. It’s not just outright, but the loonie looks vulnerable on the crosses as well. With risk-off trading strategies dominating at the moment, do not be surprised to see better levels to own the coin with an aquatic animal name early next week!

• The Fed Bullard Hints at Sustained Aggressive Monetary Policy
• GDP Targets potentially to be given to Central Banks
• Fed Signals Possible Slowing of QE
• Dollar Index Touches Three-Month High
• FOMC Minutes Have Far Reaching Impact
• US Stocks Falls Most Since Nov on FOMC Minutes
• US 10-year Treasury Yields Close to Highest in 10-months
• Fed Watchers: Doves rules FOMC roost, despite Hawks protests
• Fed Message Likely to be Dovish
• Canadian Assets For Sale; A First In 8-Months
• Looking for When QE3 May Draw to a Close
• Ben Bernanke: US “Far From Full Strength”
• US Banks Still Receiving Bailouts

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.