The CAD outlook versus USD is favorable for a few reasons:
1) As mentioned by Atticus, the Loonie has become a petro-dollar given the size of Canadas' reserves and juxtaposition to the US.
2) Recently, the Fed reaffirmed its commitment to Easy Money in light of an otherwise mortgage/financial sector blowup. More money in the system spurs already skyrocketing commodity prices as investors seek a haven in hard assets. One of those assets being oil.
In order to buy Canadian oil, one must first purchase Canadian dollars (and sell USD, EUR or whatever).
Anytime inflation is rampant, commodities rise as a safe haven, and therefore, peto-backed currencies to purchase that asset.
Helicopter Boy is a shoe-in for Easy Money and I don't see that ending soon....
3) Geopolitically, a War with Iran is inevitable before the Neocons leave office. Irans oil and gas infrastructure will be decimated. Rates must be low prior to a War. Otherwise, high rates and stratospheric oil prices will break this Bulls neck like a Chicken. Without a decent economy to placate the American public, the Iran War will have no legs. And what would be the point of that??
All signs point towards very easy credit until Bush leaves office....
A final note - interest rates are crucial. Nation-states refuse to stand idly by as the US FED spends their productive output while they remain fiscally responsible.
Monetary markets are now one due to globalization and the free flow of trade. When the FED prints, its not just US prices that inflate - but prices the WORLD OVER.
So nations are faced with prisoners dilemma. Either inflate along with the US so they benefit more from their OWN productive output (relative to the US. IOW - beat them TO THE PUNCH). Or keep rates at a 'responsible' level and watch the USD buy everything through the roof - and the foreign bankers still get screwed!!!
Its really economic hegemony.
