Home Daily Commentaries Strong Canadian dollar continues, despite BoC Rogers talking about evidence of an overheated Canadian economy

Strong Canadian dollar continues, despite BoC Rogers talking about evidence of an overheated Canadian economy

Thursday 8 September, 2022

Daily Currency Update

Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, said it would be nice to have a stronger Canadian dollar to buffer inflation. After her comments, the CAD climbed to its highest level in nearly eight days and the USDCAD pair fell to 1.3075 (strong CAD). Rogers said that policymakers would closely monitor how consumption, global supply disruptions, and inflation measures evolve as borrowing costs rise to slow economic growth. However, some early signs show interest-rate hikes are working in Canada. Rogers added: “Our primary focus will be to judge how monetary policy is working to slow demand, how fast supply challenges are resolved, and most importantly, how both inflation and inflation expectations respond.” Rogers, the number 2 in the BoC, also said that there is evidence the Canadian economy continues to overheat.

Key Movers

USD was mixed today, falling against CAD and CHF by 0.6% and 0.24%. However, it continued to march higher against the euro, pound, Australian, and New Zealand dollar by 0.15%, 0.23%, 0.24%, and 0.3% respectively at the time of this writing. Fed Chair Powell said in his Cato Institute interview this morning that the 2008 financial crisis has changed the financial system. He said, “We are now living in a world of high and volatile demand for safe, liquid assets.” He inferred that there is a natural cap to how much the Fed will shrink its balance sheet to supply reserves in stressful times. The European Central Bank hiked 75 bps on Thursday with another ~75 bps hike priced in for October. Furthermore, the Bank of England is expected to raise rates at least 50 bps at its policy meeting next week. Queen Elizabeth II died at the age of 96, after 70 years on the throne, and the GBPUSD continues to fall, with only ~100 pips away from a new 37-year low, trading around the 1.1500 handle at the moment.

Expected Ranges

  • EUR/CAD: 1.3053 - 1.3152 ▼
  • GBP/CAD: 1.5053 - 1.5158 ▼
  • AUD/CAD: 0.8817 - 0.8885 ▼
  • USD/CAD: 1.3080 - 1.3154 ▼