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Loonie Rangebound Ahead of Event Risks

Published November 1, 2016
  • USDCAD continues to trade on either side of the 1.34 handle, with key event risks still on the horizon
  • This morning, Canada reports GDP data for August with the market looking for a 0.2% increase in output over July
  • BoC Governor Poloz enters stage right at 1145am ET and will be providing the entertainment once again as he addresses markets from Vancouver, BC
  • His last two public statements on monetary policy and the economy required later clarification on his intentions as the Loonie swooned and soared along with every word
  • The US releases a slew of data this morning as well, with ISM Manufacturing and Construction Spending the highlights
  • The Fed also begin their latest two-day policy meeting today with the rate decision delivered Wednesday
  • No change is expected; however, they are anticipated to set the table and light some candles for a December rate hike which markets are now eagerly awaiting – forks and knives are ready, all we need is the steak!
  • The rest of the week's focus will be centered on Friday's dual jobs reports for October from the US and Canada 
  • Along with the continuing drama unfolding in the Presidential race, there are numerous risks that could break USDCAD out of its recent tight range; the balance of probabilities seems to lie with a stronger US dollar in the short and medium term, but one can never be sure…
  • Oil prices look to be heading for a continued rough patch as OPEC appears unable to cooperate and seasonal studies over the last 5-years show that Q4 and Q1 are typically difficult for the Loonie with average gains of just over 5% for the greenback from October – March (Chart 2)
  • All in all, plenty to digest! Prepare the best you can!

Charts: (1) USDCAD and US-CA 2-year spread both move higher. (2) Seasonality Chart OCT – MARCH last five years shows USD +5.7%. (3) Fed rate hike odds. (3) Economic Calendar.