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USD/CAD listening to Governor Poloz - TD Securities

FXStreet (Łódź) - The TD Securities team of economists suggests that intraday risks for USD/CAD are geared to the downside, as most propbably Bank of Canada Governor Stephen Poloz will not discuss the exchange rate in depth during his speech later today.

Key quotes

"We believe Mr. Poloz will reiterate that the level of the exchange rate is not a policy target and that a flexible exchange rate is a key component within the BoC’s inflation targeting framework."

"In addition, the Governor will also note that a weak currency is a double-edged sword as it helps Canadian competitiveness in the short to medium-term but hurts investments in production capacity via more expensive capital goods, which ultimately hinders competitiveness in the longer run."

"None of these would constitute new information. Perhaps it will be more interesting to see if the BoC takes this opportunity to release new research into the exchange rate pass-through to inflation, which could offer some guidance regarding the timing for future policy steps."

"Given the upside risks to the manufacturing data release that we see and the likelihood that Governor Poloz may not say much on the exchange rate that we do not already know, we think intraday risks for USD/CAD are once again geared to the downside."

"We can detect a slightly better offered tone to funds as our session gets underway again today."

"Losses yesterday slowed in the low 1.10s as expected, but we think the USD risks shifting a little lower still in the next 24 hours or so—especially if support at 1.1030/40 were to yield this morning."

"We think spot may trade down to 1.0965/75, taking back around half of the 1.0825/1.11 move up seen over the past week."

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