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In this installment, George discusses the slow start to the year for the Canadian economy and his expectation that equity markets will continue to be the primary driver of price action for USDCAD in 2021.
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In the December 2020 installment of the George Davis Report, George discusses the surprising advance of the Canadian dollar amidst the pandemic as well as fundamental and technical issues that shape his bullish view for the Canadian dollar.
In this installment George discusses the US election results and the surprising market reaction as equities rallied through a contested outcome. Also, a split congress will have important policy implications going forward which has magnified the relief rally we have seen so far. Next, George highlights some challenges for the Canadian economy, with the most relevant being that the rebound in growth has levelled off. That said, equity markets have been the most important driver of the CAD and this is expected to continue. USD buyers should look to the 1.2700/1.2800 area to buy USD while sellers should look at moves to 1.3200/1.3300 as an area to start reducing exposure.
In this installment George discusses the recent volatility of USDCAD as it reached both extremes of CM’s trading range, starting the month near 1.3000 then rallying to reach a high just above 1.3400. This volatility is expected to continue through October and beyond likely due in part to an uptick in Covid cases, which has GDP implications and to the upcoming election with the market slowly pricing in a Biden victory. A contested election result could provide a shock to markets if equities were to selloff. Given the strong correlation between equity markets and CAD, the Canadian dollar would move lower. At this point, George sees no reason to change his expected trading range. USD buyers should look to the 1.3000/1.3100 area to buy USD while sellers should look at moves to 1.3400/1.3500 as an area to start reducing exposure.
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In the September 2020 installment of the George Davis Report, George discusses the factors that led to USDCAD reaching a 7-month low in late August, as well as expectations for growth and possible outcomes for the US election.
Dr. MacKay updates us on COVID-19; he discusses the data on the number of cases and how close we are to a vaccine, as well as the impact of the race to find effective treatments and answers the question on all of our minds: “When will we be back to normal?”
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This report is part of the “New normal, new opportunities” series, in which we examine secular trends in a post- COVID-19 world. The series will cover a range of themes that are emerging as a result of social distancing, the work-from-home imperative, health care developments, corporate implications, and broader societal change. We believe identifying these trends and understanding their investment implications will be critical to navigating the road ahead. Additional reports will be released over the next few months.
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In the July 2020 installment of the George Davis Report, George highlights his view for CAD will likely weaken to the 1.3800 area over the summer months while citing other factors that may have negative implications for CAD going forward.
In the June 2020 installment of the George Davis Report, George answers general questions from students in the CM summer internship program regarding a Covid-19 vaccine, negative interest rates, Canadian employment and other factors that could be bearish for CAD going forward.
In this installment George discusses how markets have recently begun to stabilize from the initial shock of Covid-19. As a result USDCAD tumbled from above 1.4600 down to the 1.4000 area. Tiff Macklem has been appointed as the new BoC Governor and George feels this should be a relatively smooth transition with no major changes in policy stance. With inflation expected to be below target over the next couple of years, from 1.3 to 1.5% (versus 2%), the bank is expected to maintain their accommodative policy while keeping interest rates at 0.25%. George goes on to mention that equity markets have overtaken oil as the primary driver of CAD, suggesting that this is the best proxy for risk sentiment. An expected 40% decline in GDP growth for Q2 should lead to one more phase of CAD weakness towards the 1.4300 level. USD sellers should look at the 1.4150 to 1.4350 area to lighten positions, while the 1.3700 to 1.3900 area should look attractive for buyers of USD.
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“The last thing you want is for your cottage, a place of great memories, a true family treasure, to end up being a wedge that drives your family apart.”
In the April 2020 installment of the George Davis Report, George discusses revisions to CM's economic forecasts as well as some of the measures undertaken to help support the Canadian economy through Covid-19.
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