Nevertheless, the BoC announced it will conclude its $30B swap facility with the with Federal Reserve starting February 1, and the central bank may continue to normalize policy going forward as the economy returns to growth. Moreover, Governor Carney said that “reserve management strategies are becoming a little more broad in their asset classes” during an interview with the Financial Times, and expects the shift to be “reflected in purchases of Canadian assets and other assets” going forward. However market participants speculate the Canadian central bank to keep interest rates on hold going into the second-half of the year as price pressures remain subdued, and a pull back in interest rate expectations is likely to weigh on the exchange rate as the BoC maintains a dovish outlook for future policy.
Meanwhile, business spending is forecasted to expand in January, with economists forecasting the Ivey PMI to increase to 51.0 from 48.4 in the previous month, and the data is likely to encourage an improved outlook for future growth following the unexpected contraction in December. In addition, building permits are projected to increase 0.3% during the final month of 2009, while the economy is anticipated to add15.0K jobs in January, and the release could lead the USD/CAD to break out of the rising channel as it illustrates the relative strength of the Canadian economy. - DS
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