I suppose the Ivey may be having some small effects, but we don't think it should be. Fundamentally we don't think there's been any real shift in the Canadian economy.
The Bank of Canada is more likely to move more than the U.S..
The Bank of Canada has talked about the risks to 2007 on the downside. We would see the Canadian dollar weakening.
This is a supportive report for Bank of Canada's 'modest' rate hike plans -- good growth, but lower imported costs.
Today's number might represent some upside risk to that.
With the stronger trade surplus, I would have expected the Canadian dollar to do a little bit better, except of course at the same time the U.S. trade deficit came in smaller than expected. As a result it's been positive for the U.S. dollar.
We'll be watching the commodity prices again for the next little while in terms of direction for the Canadian dollar. We've gone through now C$1.14 and we're in a new range again.
With the commodity prices easing, especially oil and natural gas, the expectation is that the Canadian dollar would actually come down somewhat.
Basically whatever high level of investment there last year, there will be even more this year. But we have some good gains in other areas too.
A rise in longer-term bond yields would arguably be seen as doing some of the Fed's tightening work.
