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22 Aug 2014
USD/CAD points to 1.08 in medium-term - Rabobank
FXStreet (Edinburgh) - Senior Currency Strategist Jane Foley at Rabobank expects the CAD to gain ground at the beginning of the next year.
Key Quotes
“Whether or not Fed Chair Yellen stays true to her dovish reputation promises to provide the driving force to investment decisions into next week and beyond”.
“While the content of the BoC’s July policy statement was very dovish the Bank stated that it was “neutral with respect to the timing and direction of the next change to the policy rate, which will depend on how new information influences the outlook and assessment of risks”.
“For now the Bank seems confident that the higher levels would be temporary as the impact of economic slack prevailed. That said, the recent round of economic data suggest that the degree of slack in the economy could be started to gradually diminish”.
“In recent weeks the tone of Canadian data releases has been moderately upbeat. The revised July Labour market report disappointedly still showed a drop in full time jobs. So far this year the average monthly growth in employment has been just 13.5K which is insufficient to keep pace with the growth of the labour force. That said, other economic indicators provide hope that job creation could soon hasten”.
“In view of the better tone of data, the BoC may have increasing difficulty in convincing the market of its dovish outlook. We look for the first BoC rate hike of the cycle at Q3 2015, a little ahead of the Fed. We expect USD/CAD to hold current ranges near-term but see risk of a push below 1.08 at the start of 2015”.
Key Quotes
“Whether or not Fed Chair Yellen stays true to her dovish reputation promises to provide the driving force to investment decisions into next week and beyond”.
“While the content of the BoC’s July policy statement was very dovish the Bank stated that it was “neutral with respect to the timing and direction of the next change to the policy rate, which will depend on how new information influences the outlook and assessment of risks”.
“For now the Bank seems confident that the higher levels would be temporary as the impact of economic slack prevailed. That said, the recent round of economic data suggest that the degree of slack in the economy could be started to gradually diminish”.
“In recent weeks the tone of Canadian data releases has been moderately upbeat. The revised July Labour market report disappointedly still showed a drop in full time jobs. So far this year the average monthly growth in employment has been just 13.5K which is insufficient to keep pace with the growth of the labour force. That said, other economic indicators provide hope that job creation could soon hasten”.
“In view of the better tone of data, the BoC may have increasing difficulty in convincing the market of its dovish outlook. We look for the first BoC rate hike of the cycle at Q3 2015, a little ahead of the Fed. We expect USD/CAD to hold current ranges near-term but see risk of a push below 1.08 at the start of 2015”.