Updated July 8, 2008

Good Morning,

Yesterday saw another range bound session for our currency pair, after another shaky day in the equity markets, with financials being hit hard after Lehman analyst’s reported that Fannie Mae and Freddie Mac may have to raise as much as $75 billion in capital. Following this announcement, and the continued slip in oil prices, the Canadian dollar shed most of its gains from Monday morning’s more hawkish than expected BoC business outlook survey. It is still fully expected that they will keep rates on hold in next week’s meeting, as the Bank maintains a balanced outlook on growth and inflation, but any hint of strength in the economy will open the door for a rate hike later on in the year. Following the equity market selloff the Yen and Swiss Franc continued their rise as investor confidence waned. Another statement to note was at the close of the G8 summit, where it was stated that: “the world economy is now facing uncertainty and downside risks persist. Amongst others, we express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide”. Although they did not specify any particular currencies, fingers are being pointed to emerging economies with large and growing Current Account Surpluses (China) to adjust their effective exchange rates. Today’s data calendar is empty for Canada, but the US will receive some second tier data including Wholesale Inventories for the month of May which are expected to increase by 0.7%, and Pending Home Sales which are expected to slip by 2.5%. US equity futures are pointing lower, ahead of further weak earnings forecasts, so we will be buyers on dips, and expect to see continued selling interest at 1.0240.

Have a great day! Expected Range: 1.0170 – 1.0240

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