Canadian Dollar soft despite BoC Poloz’s weekend comments

The highlight of last week for the Canadian Dollar was a speech on Thursday from Bank of Governor Stephen Poloz. The overall message of the speech was that the Canadian economy is doing extremely well and is at a “sweet spot” in the economic cycle. “The economy has made tremendous progress over the past year, and it is close to reaching its full potential. We are very encouraged by this, and we are growing increasingly confident that the economy will need less monetary stimulus over time.”

Currency markets loved what they heard. USD/CAD tumbled a full cent on Thursday to a one-week low of 1.2735 and it was the best performing currency of the entire day, gaining even against a buoyant Australian Dollar. On Friday, however, the CAD was unable to resist in the face of the US Dollar’s late surge and USD/CAD ended the week very little changed from where it had begun at 1.2870.

Over the weekend, the Governor gave an interview to the Globe and Mail newspaper in which he played down the importance of so-called forward guidance. “I'm confident that other central banks, now that we are getting much more into normalcy, will gradually temper down the details around their forward guidance, too… I'm not going to judge whether the market got it right or not. But it does seem like the market has a tendency to seize on a new word as if it's a new secret code. Caution does not mean sitting back and doing nothing.”

For the moment, the Canadian Dollar hasn’t yet responded to these latest comments and for the week ahead, there’s still plenty to come on the Canadian economic data calendar. Wednesday is wholesale trade, Thursday is CPI day and on Friday it’s the monthly GDP numbers for October. First up today, though, are numbers on international securities transactions and consumer confidence.

USD/CAD opens in North America this morning at 1.2880 with GBP/CAD at 1.7220.