Canada Facing Headwinds Jan. 15/08

Forexmentor.com Forex Trading Price Action

Expect further rate cuts in Canada, now that inflation has been tamed by the high-flying loonie – which, incidentally, just got whacked by a weak December jobs report. Also expect lower prices for the loonie (translation, a higher USD/CAD pair), given the slowing growth in Canada and the Bank of Canada’s supposed inclination to let rates fall further.

Historically, whenever the U.S. goes into a recession, which is where it appears headed, Canada follows suit. And, in each case, Canadian growth suffered as well. Added to which is the fact that the softest spots in the U.S. economy are also Canada’s main export markets. Production in Canada will slow because, due to the high Canadian dollar, Canadians end up buying cheap imports over domestic products and services.

–Peter R. Bain
forexmentor.com

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