"The fundamentals that are in place right now — and that combines everything from the Bank of Canada's policy outlook relative to the Fed's, to our growth outlook relative the U.S., to sentiment — all of it supports a weakening Canadian dollar"
- Camilla Sutton, currency strategist at Scotia Capital
The Canadian Dollar has been a target of debate last weeks as on the back of Bank of Canada comments USD/CAD soared to 1.1173– the highest level in more than four years. Moreover, the pair has been trading above the parity level for eleven months, and as the Bank of Canada tries to bring the loonie even closer the Earth the pair can establish a new equilibrium point in the foreseeable future. Taking into account the latest rally performed by USD/CAD the possible rate cut from the BoC seems to be already priced in. While some analysts believe the pair will continue rising higher, Scotia Capital pointed out the Dollar is likely to climb to the 0.93 level before the end of this year. The more detailed forecasts show the pair will weaken over the next six month; however, later will stabilize around already mentioned level.
On Friday Statistics Canada said higher gas costs pushed the nation's consumer prices up to 1.2% in December, accelerating from 0.9% a month earlier. Markets, however, expected a 1.3% gain. The core measure, which strips out eight most volatile products, advanced 1.3% from a year earlier, coming in line with analysts forecasts. One of the leading indicators of economic health remained below the central bank's 2% target since April 2012, and the latest BoC meeting only put weight on concerns over persistently weak inflationary pressure.
© Dukascopy Bank SA