Canadian dollar likely to climb vs greenback
By Peter Rosenstreich
When the Bank of Canada meets this Thursday, 6 September, the likelihood of a 0.25% prime rate hike is high, which would propel the CAD upwards against the USD. An interest increase also would signal the BoC’s commitment to normalized money supply.
Interest rates have driven CAD’s forex value more than the price of crude oil. And the former should be able to rise, given Canada’s solid economy, evidenced by a 4.5% Q2 growth in GDP. Jumps in employment and housing prices suggest that inflation will build further.
AUD/USD to trade sideways until 20 September
By Arnaud Masset
The Aussie’s current strength is mostly due to US dollar weakness. And investors are largely clueless about that, until they hear the US Federal Reserve’s next pronouncement on monetary policy, due on 20 September. Therefore, we think the pair will trade sideways over the next couple of weeks. A wild card here is the European Central Bank. If it comes out dovish after its monetary policy meeting this Thursday, 7 September, that could be enough to ignite a greenback rally.
Yesterday, as widely anticipated, the Reserve Bank of Australia left its cash rate target unchanged at a record low of 1.50%. The Bank’s statement was balanced, on the one hand noting a buoyant economy, but on the other hand pointing out that an over-valued Aussie dampens output and employment. The Australian dollar edged higher on Tuesday, with AUD/USD spiking at $0.7985 during the Asian session and then stabilised at around 0.7960 in early European session.