USD/CAD Major News This Week

The rise of the USD/CAD paring has faded early in the week, when it collided with an important resistance level. This was a good opportunity for traders to take profit by pushing the pair lower, back to a support level 150 points lower.

This rise in the loonie was accentuated by the November Canadian GDP figures, which beat economists' expectations (0.3% vs. 0.2% expected). However, the pair that received the most attention last week was the EURUSD. This pairing has fluctuated in a range of 270 points, even reaching its highest level in 14 months! This sharp rise of the single currency is due to the fact that many European banks have begun to repay the funds that they borrowed from the ECB through its long-term refinancing operation (LTRO). From the 1 trillion Euros that was borrowed for 3 years, 137 billion was repaid last week.


We offer this week to revisit a topic we've discussed in previous columns and that seems to enjoy a growing presence in the international media as of late, namely, the currency wars. The term certainly captivates the attention evoking large countries leading efforts to conquer or defend economic interests. In fact, the term "currency wars" refers to the various measures implemented by central banks to instigate the devaluation of their national currency in order to boost their export sector and thus boost overall economic growth. So one tries to get ahead by boosting its exports at the expense of its economic partners who see their local markets invaded by foreign goods at artificially low prices. We must not go too far geographically or in time to find an example of the implementation of these strategies; Canada has applied them in the mid-1990s with the results we know. The country was then crumbling under debt and economic growth was anemic. Fast forward a few years and investors are scrambling to invest in Canada based on its healthy finances. However, there are significant differences with the current situation, the global economy was significantly better then and Canada essentially acted alone.

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