The Canadian dollar is not really responding to all the signals, and this raises questions. Regarding the pound, is the UK running its own monetary policy or eyeing the Fed?
The team at CIBC weighs in:
Here is their view, courtesy of eFXnews:
Don’t Fall Into the CAD Gap. Oil is off its lows and news on the Canadian economy is improving. However, that doesn’t appear to have hit the front pages for currency traders, as the C$ had barely budged against its US counterpart before Thursday’s Fed decision.
Continued uncertainty regarding the upcoming election and monetary policy south of the border appear to be the primary focus at the moment. And with polls remaining close the C$ could well slip further on that uncertainty on the run-up to October 19th. However, after that some of the recent better news regarding the Canadian economy could break into the spotlight, helping drive a rebound towards year-end.
BoE Eyeing Fed The Fed’s taking it slow. Will the Bank of England be able to do the same? The weakness of inflation in the UK recently is a key reason why most forecasters and investors are expecting the BoE to lag the Fed by a quarter or two. However, on some standards the UK is closer to falling behind the curve than the US. Growth in average weekly earnings, which have yet to pick up meaningfully stateside, are well off their post-recession average in the UK.
So while the US$ should regain strength as the Fed moves first, sterling shouldn’t be too far behind in getting a boost from central bank policy—particularly against currencies such as the euro and JPY.
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