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28 Jan 2014
USD/CAD pushes to multi-year highs on Fed and Poloz weak CAD policies
FXstreet.com (London) - USD/CAD has rediscovered its bullish momentum, breaking to four-and-a-half year highs on expectations of a further cut in the US Federal Reserve’s asset purchase programme as well as a continuing weak Canadian dollar stance from Bank of Canada governor Stephen Poloz.
Fed likely to taper
The Fed’s Federal Open Market Committee begins its two-day meeting today, with expectations of a further cut in the Fed’s quantitative easing programme. Despite some weakness in the labour market indicated by weak non-farm payroll jobs numbers released at the beginning of the month, consensus expectations are for the Fed to retrain from too much fine tuning of its tapering programme and instead to proceed with incremental cuts in the current USD75bn-a-month of asset purchases, winding up by the end of the year.
Poloz pursues weak CAD policy
Although Bank of Canada governor Stephen Poloz has not, nor is likely to directly target the currency, he has made no secret about his wish for a weaker CAD. Both Poloz and Canadian Prime Minister Stephen Harper have stated that they want to see an increase in exports to boost growth. And a weakened CAD would help make exports more attractive to the US as well as help to import some price inflation into the Canadian economy through elevated import prices.
USD/CAD is currently trading at CAD1.1155, just below a high of CAD1.1175, the highest level since July 2009.
Fed likely to taper
The Fed’s Federal Open Market Committee begins its two-day meeting today, with expectations of a further cut in the Fed’s quantitative easing programme. Despite some weakness in the labour market indicated by weak non-farm payroll jobs numbers released at the beginning of the month, consensus expectations are for the Fed to retrain from too much fine tuning of its tapering programme and instead to proceed with incremental cuts in the current USD75bn-a-month of asset purchases, winding up by the end of the year.
Poloz pursues weak CAD policy
Although Bank of Canada governor Stephen Poloz has not, nor is likely to directly target the currency, he has made no secret about his wish for a weaker CAD. Both Poloz and Canadian Prime Minister Stephen Harper have stated that they want to see an increase in exports to boost growth. And a weakened CAD would help make exports more attractive to the US as well as help to import some price inflation into the Canadian economy through elevated import prices.
USD/CAD is currently trading at CAD1.1155, just below a high of CAD1.1175, the highest level since July 2009.