Article by ForexTime
Bank of Canada governors has been attempting to talk down the CAD and have been hard at work since the early September providing remarks over the past several weeks. Despite firming growth in Canada, BoC officials maintained a dovish outlook that supports no change in the current 1.00% rate.
Bank of Canada’s Poloz was first following the announcement that rates would remain unchanged, arguing against manipulation of exchange rates by suggesting that it was incompatible with the Bank’s primary objective of keeping inflation low and stable. He commented in his September 16th speech that a flexible exchange rate is essential for the Bank to pursue an independent monetary policy.
The Bank remains wary that the global economy will weaken and has focused on the weakness in Europe and that the continent remains a question mark. He expressed cautious optimism about the outlook for exports.
The BoC has maintained its dovish views on growth and inflation since the last announcement, despite firming economic, domestic economic data and a big core CPI surprise in August. Interestingly enough, when September’s global manufacturing picture is viewed, the Bank seems to be ahead of the curve especially if economic data does not pick up.
Price inflation will likely continue to fall as witnessed by the recent decline of both WTI crude oil and Brent. Energy prices at the retail level continue to decline, which will drive inflation even lower.
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On the U.S. side of the border, data has been mixed. While employment seems to continue to improve as reflected by both the ADP Private payroll report and the Challenger Jobs report, which dropped to the lowest number of layoffs seen in the past 14 years, manufacturing dropped, which could be a forward looking view of what will happen in October.
The USD/CAD held support near the 10-day moving average, at 1.1100 and will likely retest the May highs at 1.1278. Momentum is still positive, but the trajectory of the MACD is flattening. The RSI turned lower as prices moved in favor of the Loonie, and are printing near 59, which is the upper end of the neutral range.
Article by ForexTime
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