Canadian Dollar exchange rate not reach parity with the US

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The important release today is retail sales at 8:30 am ET, which will set the tone for the day until corporate earnings start having their effect. The Market News forecast comes in at -2.1% with the range minus 1.3 to -2.6% - no positive number is even possible. Since August sales rose 2.7% (led by autos), the Sept results will mostly offset and probably cause doubts about such a joyous and heedless embrace of risk. Ex-autos, Sept retail sales may rise 0.2%, which is nothing to write home about.

We may get a pullback today, or we may not. We may get one Friday as foreign exchange traders stand back and look at what they have wrought (and take profits). Note that there is no particular sense of panic or crisis abroad in the land. The US dollar rates is falling for reasons we think we can identify and understand, especially the oil/gold story. As for perspective, why should the Canadian Dollar exchange rate not reach parity with the US? It may have a messy political landscape but it also has commodities galore and some very smart guys in the BoC with a tart tongue. The closest the Canadian dollar has come to parity is 1.1163 in 1991, by the way.

While we don’t have a problem with the Canadian , or even the Australian dollar exchange rates, we do have a problem with the Swiss franc nearing parity with the dollar. Nobody much pays attention to purchasing power parity these days, but the Swiss franc was already overvalued at 1.1500 (November 2007), so it must be wildly wrong at 1.0200. We may pay $1.50 for a Coke in Connecticut, but in Switzerland, it’s about $4.50. Eeek. Besides, the SNB is not amused at too-strong a Swiss franc, and while its main concern is with the swiss franc to euro exchage rate relationship, the best us dollar rate counts, too. The Swiss franc reached its highest ever against the dollar in March 2008 at 0.9639, the height of the financial sector crisis (and the stock market low). We would be flabbergasted to see the same crisis-level seen again--without a crisis. In fact, it’s been a while since we had something that could be named a crisis. We can’t forecast the unforecastable, but we can warn that crises are a regular feature of the landscape and we should not act as though a new one is not possible.

Pounds to US Dollars = 1.5948
Pounds to Euros = 1.0710
Euro to Pounds = 0.9339
Pounds to Australian Dollars = 1.7472

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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