USD/CAD gave up its gains made last week, capped at 1.3160, ending Friday at 1.3059 having travelled from a low of 1.2993 at the start of the month. The central banks will be a theme for the week ahead while markets standby for Wall Street action, Ross J. Burland from FXStreet reports.
Key quotes
“If the stock market rout continues, an upward trajectory on US yields could be all that it takes to drive the greenback higher again in a risk-off environment that will ultimately continue to pressure commodity prices and the CAD. While the Fed has announced it will allow the economy to run hot and despite a lower dollar being part of the game plan, it is not to say that the nail is now hammered.”
“Presuming the US stock market can stabilize, then the focus will be on the European Central Bank which will be the first meeting since the Fed’s recent announcements, the Bank of Canada as well and the US Consumer Price Index.”
“The BoC is set to keep interest rates unchanged at 25bp next Wednesday and Friday’s jobs growth data will have little bearing on the decision with job creation still slowing to 245k in August bs 250k expected. Instead, with the high-frequency indicators pointing to some levelling off in activity recently, we can expect to hear a more dovish bias from the central bank, especially with inflation remaining benign given the large output gap. However, the impact on CAD should be negligible if there are no surprises.”
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