If the Fed pursues another round of quantitative easing, the Canadian dollar may be the big winner. The loonie has tended to perform fairly well following previous quantitative easing  episodes, according to Barclays strategist Paul Robinson.
“In our view, this is likely to be the case once again, but the larger the monetary stimulus the more that it may benefit,” he said in a report.

If this is done relatively soon and in relatively large size, Mr. Robinson believes quantitative easing could produce a more positive response this time around, particularly given the success authorities had in limiting the severity of the recession in 2008-2009.

“The more successful quantitative easing is deemed to be, the lower U.S. interest rates will be, the higher the inflationary pressures around the world and the more growth will be supported,” the strategist said. “Canada seems to be perfectly placed to benefit from all of these factors.”

Based on prior evidence, Mr. Robinson believes the likely response to more quantitative easing  would take place in three stages.

In the period immediately preceding to the FOMC decision, worries about growth prospects are likely to increase, with relatively risky and illiquid assets underperforming.
Then the decision itself may lead to a relief rally, where risky assets outperform.
Following an initial response, the medium-term implications would depend on the ongoing path of news.
“Safe haven” currencies have tended to outperform both before and after past decisions, with both the Japanese yen and the Swiss franc proving to be consistently strong.

Mr. Robinson found that the euro and U.S. Dollar have opposite patterns – prior to the decision, the euro had been the strongest currency, but following it the USD strengthens.

Of course, there are some big differences this time around, particularly the euro’s reduced appeal as a hedge against risk sell-offs.