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Market Update

As the Canabuck trades through par again this morning, we will note a word of caution:  Par was not a finish line.  We've reached parity with the US dollar and it seems the sentiment has changed somewhat to the tune that we've reached our goal - pack it up and move on.  Nothing could be further from the truth.  In fact, the CAD$ looks to be consolidating its recent meteoric rise from the 1.06 level (it took only 10 days to rise this 6%).  While par represents THE biggest psychological level, the fundamentals are still in place for further gains (or perhaps more importantly, further losses for the greenback).  Consider that US rates are on their way down while Canada's seem to be on hold.  Commodity prices continue to be strong, Canadian employment numbers remain extremely strong and our governments are running the tightest ships in the G20.  Also interesting, is that this rally since Sept 10th has been matched by the AUD$ step for step, and quite closely by the NZ dollar and Swiss Franc... the difference is that while we stopped at par, the AUS$, NZ$ and the CHF continued to rise without the psychological barrier.

 

 

What could throw this off?  A flight to "quality" caused by another global credit scare would give a bid to the greenback.  More hints of fiscal prudence from Washington could have that effect as well - going into an election year could have many implications (positive and negative). Hints from the Bank of Canada of lower rates on the horizon could also throw off our dollar.

 

 

US GDP came in as expected, and jobless claims dropped a little bit, although the continuing claims did not.  Remember this GDP data deals with what happened between April and June - long forgotten from our perspective.  10 am could have a little bit of volatility as the New home sales numbers come out.  We see these being weaker than Tuesday's existing home numbers - once again, the new home sellers are running businesses and inventories don't suit them well.  The dollar could have further volatility on this number.

 



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