The loonie suffered a steep devaluation last week, but most expect current levels to reverse
The US Thanksgiving holiday interrupted late-week trade, but it returned with a bang on Friday, with markets in high-anxiety mode following reports of a new Coronavirus variant detected in South Africa. The new strain has a lot more mutations than prior variants, which highlighted concerns about its transmissibility and vaccination resistance. The good news is that the variant appears to have been found early, and some nations have imposed travel restrictions as a result. Nonetheless, a large repricing of equities markets, rates, and commodities occurred swiftly, and the 3CAD, a currency more susceptible to risk movements, fell sharply. CAD Fair Value models suggest that the currency is undervalued from a fundamental standpoint.
While the current environment has seen a steep devaluation in the loonie, most analysts concur that the Bank of Canada tightening expectations will be more resilient than those of the Federal Reserve, where investors have pushed the first hike from June to September as a result of current market turbulence. Governor Macklem has also stated that the BoC’s primary goal is to keep domestic inflation under control while also ensuring that inflation expectations are well-anchored.
The week ahead:
Following last week's data drought, we are inundated with reports this week. Friday is a particularly busy day, with US and Canadian jobs reports, as well as maybe a greater than usual attention on the pay and earnings data that goes along with them. The ISM Manufacturing and Services figures for the United States will be released on Wednesday and Friday, respectively, and numerous Fed speakers are scheduled to appear.
Last week’s USD gains make the CAD look a little exposed in the short term with the USD/CAD looking to target the 1.28 level. However, it should be pointed out that USD gains through 1.28 have difficult to hold this year; expect very strong resistance over 1.28. Over the medium/long term, expect the loonie to strengthen on the back of earlier interest rate hikes by the BoC vis-à-vis the Fed.
Get access to our market experts and sign up to receive the latest updates on any currency with our real-time exchange rate reports.
Sign up to receive the latest market news from our experts.
Who can use the MTFX payment service?
Individuals and businesses who need to send money in foreign currency internationally can use MTFX’s services. The beneficiary of the transfer must have a bank account for the funds to be paid into.
Personal clients usually use our services to transfer money between their own accounts in two different countries.
Business clients usually use our services to transfer funds to suppliers, fund international operations, or repatriate overseas earnings.
Why should I use MTFX and not my own bank?
MTFX offers currency exchange rates that are 2-5% better than those offered by the banks. Personal clients usually save hundreds of dollars per transfer and for larger transfers, the savings can run into the thousands.
We also offer excellent customer service, dedicated currency specialists, and a 24/7 online platform with best-in-class technology that allows you to complete transfers from any device virtually anywhere in the world.
Business customers save with better currency exchange rates and proven solutions geared towards managing and mitigating foreign exchange risk. Our solutions include forward contracts, market orders, rate alert services, and much more - all backed by great technology and great people.
How do customers send funds to MTFX?
Funds can be transferred via wire transfer, Electronic Funds Transfer (EFT), or ACH payment services. MTFX maintains bank accounts in all major currencies with highly-rated banks. Our banking infrastructure ensures that you can transfer funds to us quickly and securely.
How long does it take MTFX to transfer funds?
Our global network of banking partners allows us to get funds to virtually anywhere in the world quickly and efficiently. Most wire transfers from MTFX will be received by your beneficiary within 24-48 hours. MTFX also offers same-day transfers that are almost instantaneous, as well as low-cost in-country payment services for your less urgent transfers. For further information please speak to one of our currency specialists.