Week in FX Americas – Investors Expect Better Levels To Own The Loonie

The loonie fell to a fresh seven-month low against the US, its largest trading partner, after Friday’s disappointing December retail sales print (–2.1%) and a soft January inflation report (+0.1%) stoked investor concerns about the health of the Canadian economy.

Canadian core-inflation at +1%, y/y, is well below the Bank of Canada’s medium term target of +2%. Along with other recent data, it’s beginning to point to a prolonged soft patch for the country with the commodity sensitive currency. With inflation numbers like this there is no reason for Canadian policy makers to consider moving its policy rate anytime soon. The futures market is now pricing in a no rate change as far out as the middle of 2014.

Disappointing domestic data has convinced some of the Canadian corporates to reconsider moving some of their demand orders for the loonie, while the required dollar buyers are beginning to chase this market higher by shifting their buy orders up. It’s not just outright, but the loonie looks vulnerable on the crosses as well. With risk-off trading strategies dominating at the moment, do not be surprised to see better levels to own the coin with an aquatic animal name early next week!



* NZD Reserve Bank of New Zealand 2-Year Inflation Expectation
* USD Consumer Confidence
* USD Fed’s Bernanke Testifies at Senate Banking Committee
* GBP Gross Domestic Product
* USD Durable Goods Orders
* CHF Gross Domestic Product
* EUR German Unemployment Rate
* EUR Euro-Zone Consumer Price Index
* USD Gross Domestic Product Price Index
* CNY Manufacturing PMI
* USD U. of Michigan Confidence
* USD ISM Manufacturing

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell