USD/CAD has been painful for volatility seekers this week. The total range has been 1.0288 to 1.0355 — 67 measly pips. The commodity bloc currencies are at the best levels of the week as risk appetite improves.
The Bank of Canada downgraded growth forecasts earlier in the week but the market hardly took notice. The medium-term risk is that the Bank of Canada moves to a neutral stance because of worries about the US. There is also a burgeoning trend in central banking that attempts to regulate house price inflation with other means than rate hikes, Canada and New Zealand are at the forefront. If Canada were to introduce new measures it could make rate cuts more palatable but that’s a highly doubtful scenario.
Instead, watch commodity prices and risk sentiment. The main headwind for CAD at the moment is the massive $33.50 spread between Canadian oil and WTI. If Canada was getting full price for its oil, USD/CAD would be below parity.
USDCAD daily chart
