While most traders were busy watching the results of the Portuguese bond auction this morning, my focus was on the Canadian Dollar which I have been expecting to strengthen as traders and investors look to crude oil and Canadian assets as a source of safe haven assets. This strength has resulted in the Loonie being one of the best performing currencies this month and, in particular, against the Euro where it rose more than 4% last week alone.
Despite last month’s volatile housing start figures coming in at -13%, month on month, Canadian businesses remain largely upbeat about their future sales as they trade currency pressure off against easing credit conditions. This week’s BOC (Bank of Canada) business survey suggests a further appreciation of the CAD over the coming months. The survey points to business activity remaining firm, albeit on lower sales volumes for 2011. Furthermore, with a rate hike expected at the beginning of the second quarter, in the short term expect to see a move down towards the 0.97 levels, last seen at the beginning of 2008.
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