The Canadian dollar is rangebound but with a modestly bullish bias. Traders are slowly forgetting their disappointment from Friday’s weaker-than-expected Canadian economic growth data and looking ahead to higher domestic interest rates.
Last Wednesday, the Bank of Canada (BoC) sent a clear signal that the era of ultra-easy money was ending as soon as April 2022. It announced the end of quantitative easing. That news underpinned the Canadian dollar, but August Gross Domestic Product missed forecasts and rose 0.4%, and Statistics Canada predicted September would have the same growth. That took the wind out of the Canadian dollar’s sails and the currency retreated.
The Canadian dollar is getting support from oil prices. West Texas Intermediate (WTI) recovered Friday’s losses overnight, climbing to $84.17/b before retracing to $83.93 in New York trading due to profit-taking. Oil traders are biding their time until Thursday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC). Oil prices continue to be underpinned by expectations for rising demand while OPEC leaves existing production quotas unchanged. Oil producers ignored President Biden’s call to boost production.
The U.S. dollar began November with a solid bid. The greenback opened in New York with strong gains against the major G-10 currencies compared to Friday’s opening levels, with the British Pound falling 0.96%. Those gains occurred even as global stock markets rallied.
It is going to be a busy week. The Reserve Bank of Australia (RBA) monetary policy meeting is slated for tomorrow. It is widely expected to announce an end to its Yield Curve Control (YCC) policy, especially since the benk failed to buy the 0.10% 2024 bond last week.
The U.S. Federal Open Market Committee meeting follows on Wednesday. This is the long-awaited meeting where the FOMC announces the start of tapering. However, the outcome may not be as hawkish as anticipated as Fed Chair Jerome Powell will remind markets that the threshold for raising interest rates is a long way away.
Thursday, the Bank of England is at bat. The BoE could raise interest rates as suggested by new Chief Economist Huw Pill comments last week. If not, the BoC may set the stage for a December hike.
U.S. and Canadian employment reports are to be released on Friday. The impact of the data may be minimal depending upon the FOMC outcome.
U.S. Institute for Supply Management Manufacturing Purchasing Managers Index is due today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
