Major News This Week : September 30th, 2013

Currency markets were relatively quiet last week, particularly for the Canadian dollar. For the USD/CAD pair, the difference between the week’s peak and trough was only 70 basis points. We have not had such a quiet week since that of December 24, 2012. In short, it appears that recent statements made by the Fed have calmed many investors, despite the economic news in the U.S., which were acceptable overall. This week we are waiting for Canadian GDP data, due at the start of the week, followed by the release of the ISM Manufacturing Index on Tuesday and U.S. employment data on Friday. So the next few days should give us a better idea of where things are heading. Have a good week!

The Loonie

“The trees that are slow to grow bear the best fruit.” – Molière

Finally, following a brief analysis of the economic data, the September 18 decision of the FOMC was well founded. The U.S. economic recovery does not appear to be taking off as quickly as had been previously thought, as the latest employment figures for August were not as good as expected. Gross Domestic Product (GDP) was up 2.5% (YoY) in the third quarter, but this was below the 2.8% recorded one year earlier. The 0.2% increase in retail sales was discouraging. The Fed lowered its growth projections for 2013 and 2014 by 0.3 points, forecasting growth of 2.0% to 2.3%. William Dudley, President of the Federal Reserve Bank of New York, described the situation well: “Currently, improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly cancelling each other out.” Reading between the lines of the press release, we can see that the Federal Reserve will take all the time it needs in order to pick the best fruit!

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