Loonies flying away: Getting more for less and Bank of Canada's Big Decision.

The Simpsons visited Canada back in 2002. Check out this scene from Season 13, Episode 280 (2002): "The Bart Wants What It Wants"

Security Guard: We're closing in 5 minutes.
Homer: Would a US Dollar change your mind?
Security Guard: American Currency! What time would you like your breakfast, Sir?

Keep in mind 2002 actually appears to be the lowest point of the Canadian Dollar to US Dollars: 0.6179 USD.

My friend was talking about going on vacation to the US in a month with her significant other. We collectively breathed through our teeth as I grabbed a quote for Canadian Dollar (CAD) to US Dollar (USD) from YahooFinance. As of that time it was 0.6833 CADUSD, meaning for every $1.00 CAD you would receive $0.6833 USD. This makes a vacation to the US very expensive indeed. It feels so long ago back in 2013 when were were at parity with the US Dollar and trips there really didn't cost as much.

The first question I asked was her budget, which was a generic $1,000 USD. Making a quick calculation for conversion, we discovered she would need to budget at least $1,463.4860 CAD. (Calculation: $1,000 USD / $0.6833 CADUSD) This would not include conversion fees of which I have some preferential rates, but it would not help very much at such a low volume.

The other question is how would she convert it? The thought that came to her mind was hoping for the rate to improve and to have me notify her when it went higher than 0.6833 CADUSD. I wish I could say with certainty the exchange rate would improve in our favour, but that's just too difficult to be entirely certain. All, I could say was that tomorrow Wednesday, January 20th will be the Bank of Canada's Interest Rate and Monetary Policy announcement at 10:00am ET.

We're looking at an ugly situation with the BoC stuck between a rock and a hard place balancing between an oil and commodity crash that is negatively effecting Alberta and other provinces and that of increasing inflation due to the devaluing Canadian Dollar.

Here are the typical options:

1) Cut rates further? (Negative rates eventually?)

2) Hold the line and leave it open-ended for further rate cuts?

3) Alternative Stimulus Efforts? (ie. Quantitative Easing)

4) Bite the bullet and raise rates? (Less likely, but still an option)

Given the significance of tomorrow's BoC event; there is too much uncertainty of the Canadian Dollar and the decision tomorrow will have a significant impact on Canada. All I could tell her was; if you don't know, why not change some every week until vacation time? At least this seems better than dumping it all on a guess.

Time will tell; and hopefully the exchange rate does reverse its course, if only for a moment before my friend goes on vacation to the US.