The Canadian Dollar couldn’t keep up with a buoyant US Dollar on Monday, but it still ended the day higher against the EUR, AUD and NZD. USD/CAD opened around 1.2760 and after a very quiet session in Asia (not unusual for the CAD) it began to move higher during the European morning, eventually reaching a high in the New York afternoon of 1.2855; its highest since April 3rd. Its price action so far today has mirrored the other majors, with an initially stronger USD than a reversal back to last night’s levels, albeit all within relatively narrow trading ranges.
Bank of Canada Governor Stephen Poloz yesterday appeared before the House of Commons Standing Committee on Finance, though this wasn’t until 3.30pm local time; only half an hour before the close of North American markets. His published Statement largely repeated what had been said after the BoC meeting last week. “After a lackluster start to 2018, we project a strong rebound in the second quarter. All told, we expect that the economy will grow by 2 percent this year, and at a rate slightly above its potential over the next three years, supported by both monetary and fiscal policies. The composition of growth should shift over the period, with a decline in the contribution from household spending and a larger contribution from business investment and exports. Inflation should remain somewhat above the 2 percent target this year, boosted by temporary factors. These factors include higher gasoline prices and increases to the minimum wage in some provinces. Their impact should naturally unwind over time, returning inflation to 2 percent in 2019. Of course, this outlook is subject to several important risks, and a number of key uncertainties continue to cloud the future, as was the case in October.”
In his subsequent Q&A session, Governor Poloz said that, “Given what our outlook is, we’ve got monetary conditions roughly where they should be, and in that context, the fact that inflation is rising above 2 (percent) for now is due to temporary factors and we can see through them.” Poloz said policymakers are watching wages, which he said will pick up as job vacancies continue to grow, and will, in turn, encourage more people to enter the workforce. “We are just now in the last six months reaching wage movements that are actually positive in real terms, above 2 percent. And so that’s a really important bridge to cross and when we get up to the 2.5-to-3-percent zone, then we have got more scope for getting faster reintegration of people back into the workforce.” The Canadian Dollar opens in North America at USD/CAD1.2845, AUD/CAD0.9765 and GBP/CAD1.7910.