The Canadian dollar remains weak after falling against 12 of its 16 major peers as there is speculation that the Federal Reserve will begin to taper back stimulus before the Bank of Canada (BoC) does the same. This could give insight into the fact that the US economy has remained stronger than its Northern neighbor, and if the BoC continued stimulus after a Fed taper would signal that the Canadian economy is still weak.
The Royal Bank of Canada (RBC) still remain very bearish. George Davis, chief market technician at RBC, said “we started to see the investment community in general start to become a little bit more pessimistic or bearish on the Canadian dollar as we look forward to 2014.” Goldman Sachs made a top 2014 recommendation to short the Canadian dollar versus the greenback.
It is expected that the BoC will keep monetary easing at current levels heading into the December 4 policy meeting. BoC Governor Stephen Poloz believes the current benchmark rate should remain at one percent, a level not changed since 2010. There is risk that inflation may fall below the central bank’s floating one-to-three percent range, and this would give an indication the next move in interest rates will not be up. October’s consumer price data showed a print of .7 percent, a decline from September’s 1.1 percent. Poloz dropped language on higher interest rates to stop the speculation and potential shortcomings of doing so.
There is a glimmer of hope, Canada posted a larger than expected third quarter GDP of 2.7 percent. Unfortunately, Canada continues to be overshadowed by what is going on in the US. Also, the country’s largest export, crude, just reached the lowest point in five months. Bears have pulled the Canadian dollar down 3.6 percent this year.