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After the Fed’s December hint, it seems that the US dollar may have found a clear  course. Regarding the Canadian dollar, things are getting complicated.

Here is the view from CIBC:

Here is their view, courtesy of eFXnews:

The following are CIBC’s latest weekly outlook for the USD, and CAD.

USD: Won’t Get Fooled Again. After stepping away in September, the Fed once again looks like it’s itching to move interest rates higher. But the timing and pace remain linked to economic data. While the inventory-led slowdown in Q3 GDP isn’t much to worry about, growth in 2016 may disappoint FOMC and consensus forecasts. As in past years, both expect an acceleration.

But, like The Who, we won’t get fooled again. With the long-run potential of the economy much lower than it was pre-recession, we think the bar has once again been set too high.  

Disappointment in 2016 will cause the Fed to hike slower than it currently expects, and the US$ to give back any gains made in the run up to a first hike, which we still forecast for December.

US GDP bar may be too high again

CAD:  Being Pushed Around by New Factors. With oil prices trading in a range since mid-August, the loonie’s been pushed around by a variety of other factors. Coincidentally, August was also around the time when the global economic and financial backdrop began to deteriorate.

As a result, global conditions have gained importance in the minds of investors and, in particular, have had a more pronounced effect on the loonie. The currency’s correlation with the VIX, the market’s so-called “fear index”, has increased since that time.

Those global doubts, along with an upcoming Fed hike, could push the C$ weaker over the coming few months.

Global market volatility increasingly driving CAD

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