BOC’s Timothy Lane warns on strong CAD and shorts start bailing
- Closely watching CAD as it is strengthening
- Will be taking that into account strongly
- Summer data, and data from last 2 weeks has been ‘quite favourable’ for the economy
- Q2 GDP suggested growth was rather strong
- Rates are still quite low relative to what we think of as neutral level
- Households are way more indebted than they were a few years ago
- We have to watch all these changes, along with the level of the CAD
The BOC usually don’t miss a chance to comment on the currency one way or another and these comments have helped sink the CAD. USDCAD jumped from around 1.2225 to a high of 1.2337 before grinding lower to just under 1.2300. The market is still wary after the recent hike caught many traders on the hop and sudden jawboning of the currency has brought a more nervy reaction than it might normally.
If the price can’t build a base above 1.2300 then there is scope to see a lot of this move reverse. At the moment support is putting up a fight at 1.2280 but a break there could mean a swift move back to the 1.2240/45 area, with further support under there at 1.2220/25.
You can read the full speech from Lane here BOC Lane remarks-180917