The Miotto Group Memo

The U.S. dollar has been stronger against all the major currency crosses in 2024. While the year-to-date lead is rather small versus the British pound, it has been much more impressive against both the Swiss franc, Japanese yen and Norwegian krone. Despite the recent bounce in commodity prices, the Canadian dollar has been on a downward march this year, and over the last few days has been approaching the key US$0.72 support level that has been in place since mid-2022.

CAD/USD Exchange Rate

It has been a blockbuster week for top tier economic data, including a fresh U.S. Consumer Price Index (CPI) report and a Bank of Canada (BoC) rate announcement on Wednesday. Combined, it led to a rapid decline in the Canadian dollar against the USD, as investors repriced their central bank rate expectations. During Wednesday’s BoC press conference, Governor Tiff Macklem sounded very comfortable with the idea of an imminent rate reduction, saying that a June rate cut was “in the realm of possibilities.” He suggested that if things evolve in line with the current outlook, it could be appropriate to cut interest rates sooner than later. Meanwhile, the latest U.S. CPI print – which came in hotter than expected for a third consecutive month – considerably reduced bets on the number of Federal Reserve rate cuts this year.

Investors are now expecting fewer than two U.S. rate cuts in 2024 compared to more than six predicted at the start of the year. As a result, the spread (difference in current rates) between the Canadian and U.S. 2-year government bond yield has reached its widest level since March 2023, when the loonie was trading at C$0.723. If – as Macklem alluded to – the BoC embarks on an easing cycle well ahead of the Fed (first cut priced-in for November now), and the 2-year yield spread keeps widening, the loonie will likely face stronger headwinds. Should the currency break on through that crucial US$0.72 level, the next major support area to watch stands around US$0.69 (the level hit in 2016 and 2020) from a technical analysis perspective.

For a brief breakdown of what happened in the financial world and markets this week, see the article  HERE, and don’t hesitate to reach out if you have any thoughts or questions.

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Scotiabank Partners With Willful To Make Estate Planning Easier For Clients

For many, estate planning can be a daunting task, with 43% of Canadians reporting they don’t have a will, according to a new Scotiabank survey. This sentiment is even higher amongst younger Canadians, as two-thirds of people ages 30-45 (66%) do not have a will in place. To help, Scotiabank is proud to team up with Willful, one of Canada’s leading online estate planning services that makes it simple, convenient, and affordable for Canadians to get a will and other important estate planning documents online.

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If you have any questions about your Will and estate planning, please don’t hesitate to reach out to our team.

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