Philippe Jauer, a money manager at Amundi Asset Management, says the Biden spending package will be bullish for the Canadian dollar and other resource-linked currencies. The administration is moving “swiftly, massively and this is what the market is looking at for now,” he said, adding that Canada’s export market stands to benefit.
The combination of solid growth and subdued inflation is particularly appealing to fixed-income managers. Headline consumer-price inflation in Canada is running about 1.1 per cent per year — below a 1.7 per cent reading in the U.S. The five-year breakeven inflation rate for Canada, a gauge of bond market expectations for consumer-price gains, is around 1.9 per cent, compared with around 2.6 per cent for a similar U.S. measure.
Not everyone is upbeat on the loonie. For Bipan Rai, a strategist at Canadian Imperial Bank of Commerce, the global growth story is already priced in and he anticipates weakening versus the greenback as markets re-price central bank policy. “Put simply, we don’t think that the Bank of Canada will hike ahead of the Fed when push comes to shove post-2021.”Article content
One-year implied volatility in the Canadian dollar last week plummeted to the lowest level in more than a month — a sign that options traders are getting more comfortable with loonie stability longer term. Technically, the loonie is flirting with key long-term hurdles against the U.S. dollar, euro and yen. Versus the greenback, a double-top and descending wedge pattern since March 2020 have spot slowly approaching a 2015 support line at around 81.45 US cents, from its current level of about 79.
Yeh because 82 cents is great
The NP just called the top.