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Major News This Week : July 29, 2013
By The National Bank of CanadaCurrenciesJul 30, 2013 07:05AM ET
www.investing.com/analysis/major-news-this-week-:-july-29,-2013-177623
Major News This Week : July 29, 2013
By The National Bank of Canada | Jul 30, 2013 07:05AM ET Last week got off to a strong start with the release on Monday morning of Canadian retail sales data. Many were caught by surprise to hear that sales grew 1.9% in May, close to five times economists’ forecast of 0.4%. This put wind in the CAD’s sails for the week, and it gained several points on the greenback. This week we are waiting for the release of data on Canada’s Gross Domestic Product for May. The market is expecting the Canadian economy to have grown 1.6% on an annual basis. A second bit of unexpected good news could drive the Canadian dollar even higher. Have a great week!
The Loonie
“You have to learn the rules of the game. And then you have to play better than anyone else.” Albert Einstein Short-term fluctuations in currency valuations against the greenback exploded again in the second week of July, following comments made by a central bank. In this case it was Ben Bernanke of the Fed who, speaking after the release of the minutes of the FOMC’s meeting, changed direction from his previous speech. But why the backtrack? Perhaps due to the drastic jump in 10-year U.S. bond rates. With the country’s mammoth debt held by its central bank, there is significant risk of losing control over the real cost of this atypical way to stimulate an economy. Sooner or later, the Fed will need to abandon this accommodative program and, according to a recent Bloomberg survey, more and more pundits are predicting it will begin tapering its bond purchases in September. There is agreement in the market that this decrease in stimulus does not represent tightening, which helps push the U.S. dollar down. However, a series of good economic indicators from the U.S. could accelerate the tapering schedule, such that we would see the policy change from very accommodative to accommodative.
In this economic environment, we have monitored the volatility index at three months based on certain Canadian dollar spot rates. As it turns out, with the exception of 2007 we have not known volatility this low, with levels from 1.0350 to 1.0600. In 2007 we had experienced a spike in the price of oil.
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Major News This Week : July 29, 2013
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