With US markets closed for Martin Luther King Day and economic data releases in short supply, most currency pairings were trading in a fairly narrow range.
The Canadian Dollar however was able to post modest gains against peers like the US Dollar and Euro ahead of the Bank of Canada’s rate decision.
While the BOC is expected to adopt a fairly dovish stance in light of the stream of less-than-impressive data releases to emerge from Canada over the past few weeks, rates are forecast to remain untouched for the time being and the ‘Loonie’ was able to claw back some of its recent losses.
As well as advancing on a sluggish Euro the Canadian Dollar strengthened slightly against the ‘Greenback’ having hit a four-year low against its neighbouring rival last week.
Foreign exchange strategist Karl Schamotta stated; ‘After dropping language about rate hikes in October, observers believe that [BOC Governor Stephen Poloz] will now signal the need for lower benchmark yields. If this is the case, there will be little to stop the currency from blowing through the C$1.10 mark on the way toward C$1.12.’
The Euro, meanwhile, experienced minimal movement after a German report revealed an unexpected increase in producer prices.
Producer prices in the Eurozone’s largest economy rose by 0.1 per cent in December, month-on-month, rather than stagnating as forecast.
The Canadian Dollar has now been trading below parity with its US counterpart for a year, and industry experts are adopting varying stances when it comes to deciding whether this is a plus or a negative for Canada’s struggling economy.
While some have argued that a lower exchange rate will benefit the nation’s exporters and boost growth, others have warned that a weaker domestic dollar will damage the pockets of all citizens.
This week’s BOC policy announcement could prove integral for driving CAD/USD movement as the week progresses.
In the mind of Stephen Gallo, the Bank of Montreal’s chief economist; ‘The perception that the market has of Poloz wanting a weaker CAD means [this] week’s statement could be the clear impetus everyone is hoping for to bring us through 1.100.’
Tomorrow the Euro could recover declines against the Canadian Dollar if the ZEW economic sentiment surveys for Germany and the Eurozone show the improvement expected.
The German ZEW economic sentiment survey is forecast to advance from 62.0 to 63.0 in January.
Although not as influential, Canadian wholesale sales and manufacturing shipments reports will also be of interest.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8262 ,
Euro,,New Zealand Dollar,1.6427,
Euro,,Canadian Dollar,1.4862 ,