Major News This Week : July 15, 2013

More economic news are expected this week, but of course the currency market will be most affected by the data and comments from central banks. We will be paying close attention to the Bank of Canada’s decision, but above all to comments made by its new Governor, Stephen S. Poloz. His initial comments were conciliatory, and this has weighed on the value of our currency. A change of tone this week is unlikely, and this could benefit USD sellers. We will also need to pay close attention to the Fed’s Beige Book, to be published on Wednesday. Issued eight times per year, the Beige Book describes economic conditions in the U.S. and informs FOMC members about current economic trends. Economic data from China are also worth watching closely now that less growth is expected.


The Loonie

“You may delay, but time will not.” Benjamin Franklin

This week we analyze the key theme that has affected all asset classes for over a month now: quantitative easing by the U.S. Federal Reserve. But first we review the events of last month, when the Fed met on June 18 and 19. At the press conference that followed the FOMC meeting, Ben Bernanke said that economic forecasts at the time were consistent with a gradual tapering of quantitative easing, which would probably end in mid-2014 when the unemployment rate would be near 7%. This key statement brought chaos to all the markets, drove the DXY up 1% (the DXY is an index comparing the U.S dollar to a basket of six currencies, including the euro and the Canadian dollar), sent the 10-year U.S. bond yield up 0.17 percentage points, and brought the S&P 500 down by 1.4%, all in one day! For a short period of time before Mr. Bernanke’s speech last Wednesday, the U.S. dollar appeared unbeatable and was rising against all other currencies. But the pessimistic speech by Mr. Bernanke, in which he clearly stated the Fed’s two mandates–an unemployment rate of 6.5% and 2% inflation–turned market trends upside down. Since the Fed has not achieved its double mandate, Mr. Bernanke continues to promote an accommodative monetary policy.

To Read the Entire Report Please Click on the pdf File Below.