The Canadian dollar is stronger against most global currencies this morning, except the US dollar. Last Friday, employment figures were substantially higher than consensus estimates (+79k vs. 1k estimated). Thanks to very strong jobs growth and a lower unemployment rate (5.7%), the odds of a rate hike are up sharply. The next Bank of Canada meeting is scheduled for next Wednesday (January 17). Thanks to recent strength in the currency, we will upgrade our medium-term outlook to neutral this morning. We will also upgrade our short-term outlook to bullish. As the currency is supported by monetary policy expectations, the Canadian dollar should stay strong in anticipation of the BoC meeting. In the longer-term, we continue to believe that the currency is headed down thanks to the ongoing economic slowdown in China and (eventually) lower commodity prices. Canada is also in the midst of a significant housing and consumer credit bull market that makes its currency particularly vulnerable to external shocks.
The USD/CAD exchange rate is currently above 1.2410. The euro is down against the Canadian dollar, with EUR/CAD currently above 1.4880. The pound is down against the Canadian dollar, with GBP/CAD trading above 1.6790.
This is a very light week for economic data releases relating to the currency. Later today, we'll get the BoC's business outlook survey. Tomorrow we'll see housing starts. On Wednesday we'll see build permits. On Thursday, we'll get new housing price index numbers. Last week, changes in employment were significantly ahead of expectations.
As the Canadian dollar rallies on rate hike hopes, we are upgrading the currency to bullish in the short-term. Looking at various technical indicators on a daily chart of the Canadian dollar, the currency is now trading within normal conditions.
As the Canadian dollar strengthens on higher crude oil prices and rate hike hopes, we are upgrading the currency to bullish in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.