CAD Losses Against U.S. Dollar, While EURO gains

Poor equity-market performance continues to favour U.S. dollar bullishness at the expense of the loonie on Wednesday.

The Dow Jones industrial average is down 322.97 points to 8370.99 and the S&P 500 is down 37.37 to 861.58. The CAD/USD is down 0.0162 to 0.8123 (USD/CAD at 1.231). Adding to the loonie's woes are slumping commodity prices. West Texas Intermediate crude oil is now down $3.15 per barrel to $56.18.

Similarly, the loonie is down 3.36 points to 77.54 against the Japanese yen, which has been strong during current waves of risk aversion in financial markets.

The Canadian dollar is down 0.0139 to 0.6476 against the euro. CIBC FX strategists anticipate further gains by the euro (EUR/CAD 1.5442).

"We advocate flattening previously suggested long EUR/CAD positions at current levels, and would begin rebuilding core short positions on further cross strength to 1.5500-1.5600, using 1.5700 as the clear risk point," they wrote.

The Canadian dollar is meanwhile up 0.0076 to 1.2676 against the Australian dollar and up 0.0048 to 0.5433 against the weakening pound sterling. The CAD/GBP had been at session lows of 0.5366 at 5:30 a.m. EST when a dovish Bank of England (BOE) quarterly inflation report pushed the pound down against all major foreign currencies.

Commerzbank's Peter Dixon wrote in a reactionary e-mail to clients that interest rate cuts to 2.00% (from 3.25%) will likely be realized by next summer.

"This morning's release of the Inflation Report shows that the BoE is expecting a sharp downturn in economic activity over the next twelve months, with GDP growth next year likely to contract by at least 1.5%," he wrote, noting that a sub-2% overnight lending rate could prove unnecessary. "Either way, low interest rates are here to stay for at least the next two years."

CAD/USD down 0.0162 to 0.8123.
CAD/EUR down 0.0139 to 0.6476.
CAD/JPY down 3.36 to 77.54.
CAD/GBP up 0.0048 to 0.5433.
CAD/AUD up 0.0076 to 1.2676.