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Daily outlook for CAD: Commerzbank

Quotes from Commerzbank Corporates & Markets:

-CAD: Bank of Canada (BoC) governor Stephen Poloz has managed once again to move markets. The surprise rate cut in January was an insurance against downward risks in connection with the falling oil price. By taking the step the central bank had bought time so as to be able to wait and see how the economy really does react. Following the comments USD-CAD eased notably and following yesterday's highs at 1.2650 traded only just above the 1.2450 mark.

-Of course it has to be taken into consideration that as a result of the G7 accord the BoC is committed to market based exchange rates and that it would therefore be unable to admit that its monetary policy is aimed at weakening its currency. However, Poloz' comments suggest that perhaps we need to apply some finer distinctions in the depreciation race in the future.

-Between central banks that are specifically trying to refuel stubbornly low inflation levels via an expansionary monetary policy and commodity dependent countries like Canada, Norway and Australia that are trying to cushion the effects of low commodity prices on their economies.

-The latter are likely to increasingly rely on data for their rate decisions. That means that tomorrow's Canadian inflation data for January will gain completely new significance. As a result volatility in CAD is likely to rise as well. 

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