The Canadian Dollar did extremely well on Thursday and knocked the AUD off top spot in the one-day performance table. We’ve been flagging up here all week the fascinatingly-titled speech from Bank of Canada Governor Stephen Poloz on “things that keep me awake at night”. He did not disappoint. He is always a wonderfully thought-provoking speaker, never afraid to go against the prevailing G7/BIS consensus and full of insight into the policy-making process. He is a very under-estimated Central Banker; erudite but self-deprecating in equal measure.
His speech to the Canadian Club in Toronto can be summarized briefly, the three issues were cyber threats, high house prices and “The tough job market for young people”. He also threw in a wonderful dismissal of bitcoin: “the term “cryptocurrency” is a misnomer: “crypto,” yes, but “currency,” no. For something to be considered a currency, it must act as a reliable store of value, and you should be able to spend it easily. These instruments possess neither of these characteristics, so they do not constitute “money.”
Overall, the context of his speech was that the Canadian economy is doing extremely well and is at a “sweet spot” in the economic cycle. “The economy has made tremendous progress over the past year, and it is close to reaching its full potential. We are very encouraged by this, and we are growing increasingly confident that the economy will need less monetary stimulus over time.”
Needless to say, currency markets loved this speech. USD/CAD tumbled a full cent to a one-week low of 1.2735. It opens in London this morning at 1.2770 with GBP/CAD at 1.7160.