Investing.com - Financial Markets Worldwide

Trend Reversal Or A Statistical Anomaly?

ByThe National Bank of Canada
Published 02/28/2013, 06:54 AM
Updated 05/14/2017, 06:45 AM
FISI
0.11%

Figures released last Friday showed stable inflation in Canada, but retail sales data were disappointing, revealing a 2.1% decline in December 2012. In the U.S., the markets were disappointed by the minutes of the FOMC’s latest meeting. Participants mentioned that the economic outlook was stable compared to the last meeting in December. Doubts were expressed about the relevance of the Fed continuing to spend $85 billion per month on bond purchases. In closing, Moody removed England’s AAA rating Friday afternoon. Public debt which stands at around 93% of GDP is the main reason for this announcement. This will not help the British Pound which is in freefall since the beginning of the year with a depreciation of more than 5%.
Forecast & Previous
The Loonie
‘’The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.’’
Ernest Hemingway

Since the financial crisis ended in 2009, foreign investors’ purchases of Canadian securities has often been mentioned as one of the factors behind the rising value of the loonie. The AAA status of Government of Canada debt and the great stability of Canada’s financial institutions have helped attract foreign capital. Whether or not these capital inflows will continue is key to understanding the outlook for further appreciation of the Canadian dollar. Given that we learned last week that the levels of Canadian assets held by foreign investors fell in December, we need to consider whether this represents a reversal of the trend we have seen since 2009 or simply a statistical anomaly.

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