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Thread: U.S. Forex Market Commentary - CAD

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    Default U.S. Forex Market Commentary - CAD

    CAD

    The Canadian dollar gained ground vis--vis the U.S. dollar today as the greenback tested bids around the C$ 1.0810 level and was capped around the C$ 1.0885 level. The pair reached another multi-decade low dating back to December 1977 after Canadas leading indicators rose 0.4% m/m in April. U.S. dollar offers are cited around the C$ 1.0895 level.

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    Date Change Overnight Rate
    =--------------------------------------------------==

    2007

    Jan. 16 Unch 4.25%
    March 6 Unch 4.25%
    April 24 Unch 4.25%
    May 29 Unch 4.25%
    2006

    Dec. 5 Unch 4.25%
    Oct. 17 Unch 4.25%
    Sept. 6 Unch 4.25%
    July 11 Unch 4.25%
    May 24 Up 25bps 4.25%
    April 25 Up 25bps 4.00%
    March 7 Up 25bps 3.75%
    Jan. 24 Up 25bps 3.50%


    2005

    Dec. 6 Up 25bps 3.25%
    Oct 18 Up 25bps 3.00%
    Sept. 7 Up 25bps 2.75%
    July 12 Unch 2.50%
    May 25 Unch 2.50%
    April 12 Unch 2.50%
    March 1 Unch 2.50%
    Jan. 25 Unch 2.50%

    2004

    Dec. 7 Unch 2.50%
    Oct. 19 Up 25bps 2.50%
    Sept. 8 Up 25bps 2.25%
    July 20 Unch 2.00%
    June 8 Unch 2.00%
    April 13 Down 25bps 2.00%
    March 2 Down 25bps 2.25%
    Jan. 20 Down 25bps 2.50%

    2003

    Dec. 2 Unch 2.75%
    Oct. 15 Unch 2.75%
    Sept. 3 Down 25bps 2.75%
    July 15 Down 25bps 3.00%
    June 3 Unch 3.25%
    April 15 Up 25bps 3.25%
    March 4 Up 25bps 3.00%
    Jan. 21 Unch 2.75%
    Last edited by TheRock; 05-29-2007 at 01:11 PM.
    Is Cookin!!!

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    OTTAWA (Dow Jones)--Canada's central bank Tuesday served clear notice that it was prepared to raise interest rates to ease inflationary pressures.

    The Bank of Canada sent the signal on the day it held the benchmark overnight rate steady at 4.25% for the eighth consecutive time.

    "On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2% inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to target," the central bank said in its fourth policy decision of the year.
    The change in stance comes a year after the Bank said it was done raising rates after seven consecutive increases. The last seven statements have reiterated that the 4.25% rate was consistent with achieving the inflation target.

    Tuesday's rate decision conformed with the unanimous expectations of economists surveyed by Dow Jones Newswires.

    The Canadian dollar firmed immediately after the interest rate decision was issued at 9:00 a.m. EDT. The U.S. dollar was quoted at C$1.0790, down from C$1.0812 just before the release. In other words, one Canadian dollar was worth 92.68 U.S. cents, up from 92.49 U.S. cents.
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    1307 GMT [Dow Jones] As many expected, the Bank of Canada has adopted a distinctly more hawkish tone in its policy statement, saying that "On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2% inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target." (DBC)
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    1311 GMT [Dow Jones] The hawkish bent of the Bank of Canada's policy statement, which says "some increase in the target for the overnight rate may be required in the near term," has knocked USD/CAD to a new 30-year low at C$1.0745, its lowest level since Sept 1978, according to EBS. (DBC)
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    The Bank of Canada explicitly mentioned the Canadian dollar for the first time in many months.

    A recent string of upside surprises to economic data, capped by core inflation surging to a four-year high in April, helped drive the Canadian dollar to 30-year highs last week as market speculation about rate hikes heated up.

    "U.S. economic activity has come in largely as expected and continuing robust growth outside North America has maintained the global demand for, and high prices of many commodities produced in Canada," the Bank said.

    "Against this overall backdrop, the Canadian dollar has risen appreciably above the range assumed in the Bank's April projection."
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    Forecasts in the April Monetary Policy Report assumed the Canadian dollar would trade in the 86.5-89.5 U.S. cent range.

    The Bank acknowledged that economic growth and inflation have been stronger than anticipated. It noted that the 2.5% year-on-year gain in core inflation in April and the 2.2% increase in the h1 rate were above expectations.

    Just five weeks after providing updated figures, the Bank now said the economy likely expanded an annualized 3.5% in the first quarter, a full percentage point higher than the April forecast.

    "The Bank now judges that there is somewhat greater excess demand in the economy than was thought to be the case in April," it said.

    The central bank will provide revised growth and inflation forecasts in the update to the monetary policy report, to be released July 12. The remaining interest rate decisions for the year are on July 10, Sept. 5, Oct. 16 and Dec. 4.
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    1320 GMT [Dow Jones] A report from JP Morgan Canada says the Bank of Canada's policy statement was hawkish and points to a rate hike at the July 10 decision date. "Consequently we are now expecting 25 basis point rate hikes at both the July 10 (to 4.5&#37 and September 5 (4.75%) decision dates. Based on the JPMorgan view that the US Fed will resume tightening in December, we expect that the BoC will lift the policy rate to 5.25% by the end of 1Q08," JPMorgan says. (DBC)
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    1323 GMT [Dow Jones] The BOC decision to warn it may have to raise rates in the near-term is a vote of confidence in the U.S. housing market, said T.J. Marta, fixed income strategist at RBC Capital Markets in New York. The bank had listed a sharper than expected decline in US housing as a key downside risk to the economy. With Canada's inflation and growth above expectations, "the only thing that the Canadians are really concerned about is that there be more significant fallout in the U.S. housing market and that's just not happening."
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    Conclusion
    Canada Data
    BOC:Econ Growth, Inflation Have Been Stronger Than Expected
    BOC:Somewhat Greater Excess Demand In Econ Than Expected
    BOC:Global Growth Boosts Demand, High Prices Of Commodities
    BOC:C$ Has Risen Appreciably Above Range Assumed In Apr
    BOC: Econ Likely Grew Annualized 3.5% In 1Q
    BOC:Increased Risk Future Inflation Will Persist Above 2%
    BOC:May Need Some Rate Increase To Get Inflation To Tgt
    Bank Of Canada Overnight Rate Tgt: Unch At 4.25%
    ***
    Market reaction: USD/CAD is sold off to 1.0760 on the news, having hit a high of 1.0835, creating a 15m MACD divergence that (as it is usual in these cases) has worked fine fast, despite the warning sent by the BoC regarding the rise in the CAD.
    Is Cookin!!!

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