CAD Analysis: New-Home Price Index Up; BoC President Expresses Concerns

ForexNewsNow | Published on November 9, 2010 at 2:59 pm

mark carney bank of canada cad usd forex fxNEW YORK (Forex News Now) – Mark Carney, the Governor of the Bank of Canada, called for checking the “enormous moral hazard” of bailing out financial institutions, while Canada’s New-Home Price Index increased for the month of September – creating mixed online forex news that nevertheless pushed the loonie to gains in trading today.

In a speech given today in Geneva, Switzerland, Carney voiced concerns about the aforementioned “moral hazard” that resulted from using bailouts to rescue important financial institutions around the globe during the recession. According to Carney, the bailouts were necessary to rescue a “profoundly fragile” global financial system, but came with costs.

“The cost has been enormous moral hazard that, if left unchecked, will distort private behavior and inflate public costs.”

Carney is here referring to the notion that financial institutions have obtained a public safety net of sorts that insulates them from reckless and harmful behavior – knowing that if trouble looms, bailouts like the ones used in 2008 and onwards will be there.

Carney also called for more stringent regulations, such as stiffer capital requirements for banks, in order to prevent another credit crunch like the one that paralyzed the global financial system.

The governor spoke little on current Canadian fiscal and monetary policy, but did have a few statements to possibly provide online forex news about the future of the Canadian economy in the short term. He stated that Canada is now moving to restore output and employment to “pre-crisis levels”, but refrained from indicating that Canada would raise its interest rate.

Along with Carney’s remarks, traders were treated to favorable online forex news from the Canadian New-Home Price Index.  The index reveals that prices for new homes rose slightly in September, moving up by 0.2% after gaining 0.1% in August.

This increase comes with a contraction in demand, which has been commented on by Carney in other statements. Carney has warned investors that home values may be too high and could fall further – which would place more pressure on Canadians who are already worried about debt burdens.

A report from The Economist stated that Canadian real estate values are overvalued by 23.9%, which is significantly higher than desired and could lead some investors to worry further about a Canadian real estate market collapse.

Today, the Canadian dollar has gained 0.34% against an otherwise-outperforming dollar, to 1.0001, and picked up 0.76% on the euro, to 1.3857.

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