Expectations might have been that that between 20, as the Fed expanded its balance sheet while the BOC did not, the U.S. The relationship between CADUSD and QE is a curious and counterintuitive one. That said, relative to the size of its economy, the Bank of Canada engaged in a bigger QE than any other central bank since the end of March (+22.1% of GDP). It recently joined the QE club, and with gusto.ĭespite Bank of Canada’s first-ever foray into QE, it has a much smaller balance sheet than its peers relative to size of its economy (27.3% of Canadian GDP versus 33.5% of US GDP for the Fed, 35.5% of UK GDP for the Bank of England, 54.7% of eurozone GDP for the European Central Bank and 125.1% of Japan’s GDP for the Bank of Japan).
Federal Reserve engaged in three rounds of quantitative easing (QE) between 20, the Bank of Canada (BOC) refrained from asset purchases until after the pandemic struck. The interest rate differential, measured from CADUSD futures versus the spot currency, has averaged 6 basis points annualized for the past several months.įigure 2: US unemployment spiked higher than Canada’s and is coming down more quicklyįigure 3: Canada and the US both have experienced decades of low, stable inflation Both central banks have set interest rates close to zero. have both seen decades of low, stable inflation. Both countries had a coronavirus-related spike in unemployment, which is now subsiding. cents.įigure 1: CAD has fluctuated widely versus USD over the past four decadesĬAD’s value versus USD is nearly impossible to explain based on traditional macroeconomic data. That, however, is more than 10% above its recent low set in March, when it was worth only 69 U.S.
CAD is currently near the lower end of its historic range, worth about 76 U.S. dollar (USD) has fluctuated significantly, at times rising nearly 10% or falling by as much as 37%. Over the past 40 years, the value of the Canadian dollar (CAD) against the U.S. A faster pace of reopening in Canada may have boosted Canada’s dollar vs.The Canadian dollar hit a multi-year low against the U.S.