USD/CAD Fundamental Forecast – May 27, 2016

The USD/CAD dipped 37 points to 1.2983 as the greenback gave up some of yesterday’s gains. The CAD was supported by Bank of Canada decision to hold rates. In North America today the calendar is light with only Durable Goods and Pending Homes on the calendar, so trading will likely be driven by risk flows from both equity and credit markets, but given the generally quiet state of affairs, the majors should remain tightly range bound for the rest of the day.

Comments from Governor Jerome Powell mirroring the recent hawkish pivot in Fed rhetoric would probably encourage this dynamic, particularly considering that members of the Governing Board have tended to be more dovish than regional branch presidents. The greenback is likely to stage a broad-based advance in this scenario.

The BoC as expected did not change its benchmark interest rate from 0.50 percent. Also anticipated was the addition of comments around the not fully quantified Alberta wild fires impact on the economy. The central bank was optimistic in saying the economy would bounce back in the third quarter of the year, with the first one coming in line with previous forecasts. The second quarter is being forecasted as a contraction as the economy remains too dependent on natural resources.

The statement from the BoC makes it clear that a change in monetary policy is not forthcoming this year. At least until things change dramatically from the central bank’s forecast with both a journey into negative rates and a rate hike on the table depending on the performance of the Canadian economy.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Upcoming Economic Events that you should be monitoring:

Friday, May 27, 2016

Government Bond Auctions

Date Time       Country           Auction

May 26 11:10 Italy Announces details of bond auction

May 26 11:10 Italy Holds Zero-coupon/BTPei auction

May 26 17:20 Sweden Details of I/L auction on Jun 02

May 26 19:00 US Holds 7Yr Notes Auction

May 30 11:10 Italy Holds bond auction

Jun 01 10:30 Denmark Holds bond auction

Jun 01 11:30 Germany Eur 4bn Apr 2021 Bobl

Jun 01 11:30 UK 1.5% 2021 Gilt

Jun 01 17:20 Sweden Announces details of bond auction on Jun 08

Jun 02 10:30 Spain Holds bond auction

Jun 02 11:03 Sweden Holds I/L bond auction

Jun 02 11:50 France Holds bond auction