USD/CAD Weekly Fundamental Analysis – April 18-22, 2016 -Forecast

The USD/CAD closed the week at 1.2816 with the CAD having an outstanding performance against a weak US dollar. Strong oil and gold prices helped the Loonie move up this week. Global News reports that 8 years after the financial crisis, the Bank of Canada governor believes much of the pressure that pushed world toward a second Great Depression remains present – and that central banks need help to ease it.  It is now predicting first quarter GDP to register 2.8 per cent, up from one per cent. It’s also anticipating one per cent growth in the second quarter of 2016, down from the January forecast of 2.2 per cent.

Poloz presented a better 2016 growth projection earlier this week, thanks to the new federal government’s commitment to flood the economy with cash and measures such as infrastructure projects and tax relief for middle-income earners. Without it, he said, Wednesday’s forecast would have been lower.

“We are in a setting where I think a different mix of policies would be more favorable for the world,” Poloz said at the bank’s offices in Ottawa, shortly after the bank presented its fresh economic outlook.

“We’re fortunate in Canada that was have that fiscal capability right now to actually shift our mix that way, as the government has done … This is exactly the setting where fiscal policy is its most effective and it’s also where monetary policy is its least effective.”

Under the Conservatives, the Bank of Canada wielded its primary monetary policy tool when it dropped its benchmark interest rate in 2015 – twice. The moves were intended to help cushion the economy from the impact of a commodity-price crash that began in late 2014.

On Wednesday, the bank left its key rate unchanged at 0.5 per cent. Poloz said the bank might have considered yet another cut had it not been for the fiscal measures rolled into last month’s Liberal budget.

The world has learned a lot about monetary policy tools since the 2008 financial crisis, Poloz said. To lift economies, central banks have even leaned on unconventional measures, such as negative interest rates and quantitative easing.

FxEmpire provides in-depth analysis for each currency and commodity 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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week:

Government Bond Auctions

Date Time       Country           Auction

Apr 18 11:00 Belgium Holds OLO auction

Apr 18 13:00 Norway Details of bond auction on Apr 20

Apr 20 11:05 Norway Holds bond auction

Apr 20 11:30 Germany Eur 4bn 0.5% Feb 2026 Bund

Apr 20 17:20 Italy Details of BTP€i auction

Apr 20 17:20 Sweden Details of bond auction on Apr 27

Apr 21 10:30 Spain Holds bond auction

Apr 21 11:03 Sweden Holds I/L bond auction

Apr 21 11:50 France Holds bond auction

Apr 21 19:00 US Holds 5-year TIPS auction

Apr 22 17:20 Italy Announces details bond auction