CAD Holds its Ground Against the USD

Big Money is buying dollars hand over fist at the moment, especially against the Euro and the Cable.  Investors have good reason to buy USD.  The earthquake in Chile, the interest rate decisions for the Bank of Canada (Tuesday) and the Bank of England (Thursday), combined with this Friday’s US Non-Farm Payroll report give the risk averse plenty of reason to find safe havens for their coinage.  Not to mention that from a fundamental point of view the Euro and the Cable have had strong selling pressure based strongly on their economics.

As we’re seeing in the charts, the Canadian dollar has not succumbed to that same, fear-driven, pressure however.  Why not?  Well, it may have a lot to do with a lot of very good news expected to come out of the country this week.  Largely they’ve already reported fantastic Gross Domestic Product (GDP) numbers, both annualized 4Q as well as monthly, with an increase from .4 to a whopping 5% and from .4 to .6% for Dec (respectively).  In addition, analysts expect Canada to add to that good news on Thursday with a significant, expansionary increase of their Ivey Purchasing Manager’ Index (Ivey PMI) which acts as a measure of Canadian organizations and industries confidence in the economy overall.

While these numbers go a long way toward considering CAD strength they do not stand alone.  As with any business or economy just producing things and having faith are not enough to make a profit. If you do not have someone on the other end who buys them from you you’re just stuck with a lot of inventory (not to mention the bills).  Since the US is Canada’s largest trading partner (and vice versa), it is good fortune that the US is showing its own signs of stabilization and willingness to purchase again.  That can only mean good things for the CAD overall, but this week in particular as it continues to hold its ground against the USD.

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