Forex: USD/CAD could depreciate despite rate hike – Bloomberg

Forex: USD/CAD could depreciate despite rate hike â€" Bloomberg

<!--TITOL:

Forex: USD/CAD could depreciate despite rate hike Bloomberg

FITITOL--> FXstreet.com (Barcelona) - Bloomberg news reports that the loonie could depreciate despite the fact that the BoC is amongst the first to rise rates. The news agency argues that “while international investors typically favor currencies with high rates for the potential for greater returns, traders are signaling that in Canada it would do little more than damage an economy underpinned by debt. Household borrowing was 152.9 percent of disposable income at the end of last year, climbing from about 135 percent in 2007 and exceeding the U.S.’s 145 percent”. Shahab Jalinoos, a senior currency strategist at UBS adds that “So much of Canadian growth is led by domestic demand and that domestic demand is led by consumer spending and consumer spending is linked to expanded leverage”.

Currency strategists believe the pair will be at 1.05 loonies per US dollar by year end. Canadian GDP fared worse than expected in today's announcement, showing that the economy contracted by 0.2 % last month (instead of growing 0.2%) while the raw material price index retreated 1.6% against a forecast of 0.3% growth. On the other hand, in the US the core personal consumption expenditure price index posted a YoY growth of 2.0% (forecast was 1.9%) while personal income grew by 0.4% MoM (forecast of 0.3%).

At the time of writing the pair is trading at 0.9876, up by 0.66%.