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Comments

Shel

Thank god I'm a multinational U.S. corporation!

Anna Coulling

As a full time currency trader based in the UK and working for myself, I thought I would add my thoughts to your post. I trade the USD/CAD pair a great deal and have studied the Canadian economy in detail, so I hope the following is useful. Six years after it hit an all time low in 2002 the Canadian dollar has since gained almost 40% against the US dollar and the question everyone is asking is whether this trend will continue, and if so for how much longer. On the economic front, the data presented by the Bank of Canada has continued to indicate a slowdown in growth particularly in the manufacturing sector. Canadian job prospects remain good, which would suggest that the economy is resilient at present to any slowdown. However, with the possibility of a full recession in the US, then further slowing of the Canadian economy is inevitable. In recent months the combination of favourable inflation figures and evidence of weaker growth will, I believe, encourage the Bank of Canada to cut interest rates to follow those in the US, but that these cuts will be small to avoid the possibility of increasing inflationary pressures in the economy. Overall, I believe that the Canadian dollar is unlikely to weaken sharply against the US dollar, but the current position of parity may be difficult to sustain in the longer term and a move back to around 1.10 or 1.15 would seem the most likely target. If resistance is penetrated at 1.15 then the Loonie could weaken further.

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