The forex markets await BoC rate decision The Canadian dollar sunk to one-year lows against the greenback last week, tumbling to 0.9625 before consolidating above 0.9700. By week’s end, the loonie closed below the 97 cent line, finishing at 0.9690. The downtrodden loonie has been on the down swing since the Cyprus bailout controversy reached its climax in February, as traders fearful of further contagion dumped their assets into safe havens. Up until that point, the Canadian dollar was trading at parity against its major competitor, but weaker fundamentals and macroeconomic uncertainty have made it very hard for the loonie to retrace its February losses. Amid massive commodity sell offs and weak growth in emerging markets, forex see’s loonie’s future as grim, to say the least. Forex analysts anticipate volatile trading in the week ahead, as a series of data releases and a speech from Bank of Japan Governor Haruhiko Kuroda could send the markets on a roller-coaster ride.
BoC Interest Rate May Have Some Impact On The Forex Market.
For the downtrodden loonie, the Bank of Canada’s interest rate decision on Wednesday will be of prime importance to the forex markets. If the central bank decides to stimulate borrowing by lowering rates even further, the dollar may sink to new lows against its major pairs. The loonie has however managed to outperform its commodity-sensitive peers, most notably the Aussie. CAD/AUD closed the week above parity, ticking in at 1.0050, a gain of 1.17% on the week. Given the Aussie’s current woes and the broader state of commodity currencies in general, the loonie will likely remain slightly bearish in the week to come, although much of this will depend on whether the Canadian economy can curb its current woes.
Good GDP Could See a Strengthening Forex CAD.
Friday sees the release of Canadian GDP data. If growth can outpace the modest gains reported in previous months, there may be signs of hope that the Canadian economy is on the right footing. Investor confidence in the Canadian economy was slashed in March after Statistics Canada released a report showing that over 54,000 jobs were lost that month. The USD/CAD trade remains bullish, although a series of highly-anticipated US data, including unemployment, housing and GDP figures, which is guaranteed to see an impact in the forex markets. could alter the near-term outlook on this pair. Moving into next week however, the Canadian dollar remains vulnerable. The loonie is susceptible to wild swings in investor confidence and continues to bear the brunt of declining commodity prices and weaker growth from primary export markets, most notably China. If you’re trading loonies, next week will be pivotal in determining your next move.
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