Dollar/CAD reached another milestone: the round number of 1.40 – this is yet another 11 year high and the sky seems to be the limit.
Will it pause at the round number or continue higher?
The Canadian dollar suffers from the falls in oil prices and takes it quite badly. And when oil does make some kind of recovery, the loonie’s gains are quite limited, to say the least. WTI Crude has already seen $34.50 and then USD/CAD was much lower.
And it’s not only oil, but also fresh news from Canada: inflation is not so stable as expected: prices dropped 0.1% m/m, against expectations of +0.1%. Core prices slid 0.3% m/m instead of remaining flat as expected. Also wholesale sales in Canada lost 0.6%, yes, worse than what was expected.
It is also important to remember that the Bank of Canada opened the door to negative rates: 0.50% is the new lower bound instead of 0% or the post crisis low of 0.25%. Rates currently stand at 0.50%.
And it’s also monetary policy divergence: the Fed successfully raised rates this week, so there is some kind of divergence between the US and Canada on the direction of monetary policy.
This is how it looks on the chart:
