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Forex Currency Outlook
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Job gains in offing: greenback's reversal as well?
Thu, Nov 5 2009, 10:39 GMT
by Economic and Strategy Team
- On the basis of purchasing power parity, the euro and the yen, the two most important currencies next to the U.S. dollar, are more than 20% over-valued against the greenback.
- The financial markets have not budged much in recent months with respect to the Fed’s monetary policy. However, we are of the opinion that the foreign exchange markets have begun to fear a change in the Federal Reserve’s tone.
- This, combined with the negative medium-term factor of a strong over-valuation, leads us to believe that the euro is set to decline in the face of cyclical factors that promise to be less favourable going forward.
- The real test for the Canadian dollar will come more from an eventual upturn in the U.S. government bond yield curve than from a solo Canadian rate hike.
- The behaviour of the employment component of the U.S. ISM manufacturing index suggests that the financial markets will soon begin to raise their Fed rate expectations. If so, the loonie would very likely shed a few cents.
Published on Thu, Nov 5 2009, 10:39 GMT
Archive
- Job gains in offing: greenback's reversal as well?
Published On Thu, Nov 5 2009, 10:39 GMT - USD awaiting signal from Fed
Published On Mon, Oct 5 2009, 14:49 GMT - Greenback set to firm up?
Published On Mon, Aug 31 2009, 16:24 GMT - The recovery has yet to be fully factored in by the consensus of analysts
Published On Wed, Aug 12 2009, 16:48 GMT - Loonie Climbs off it's cloud
Published On Mon, Jul 13 2009, 09:20 GMT
National Bank of Canada
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http://www.nbc.ca/ | info@nbc.ca
Legal disclaimer and risk disclosure
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.Related reports
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