The Canadian dollar faces headwinds despite a broadly weaker US dollar. Labour market softness and constrained oil prices limit the currency’s potential gains. The Bank of Canada’s policy stance, deemed sufficiently restrictive, adds further pressure.
- The Canadian dollar weakened toward 1.39 per US dollar but rebounded from a one-month low near 1.391.
- US dollar weakness is driven by concerns over Federal Reserve independence and expectations for Fed rate cuts.
- Canada’s unemployment rate rose to 6.8% amid increased labour force participation and slower hiring.
- The Bank of Canada considers its current policy rate of 2.25% sufficiently restrictive.
- Crude oil prices, particularly heavy Canadian sour grades trading at a discount, provide limited support.
- USD/CAD holds above 1.3860 despite generalized US Dollar weakness.
- Oil price pullback adds pressure on the Loonie.
The currency’s struggles indicate a complex interplay of domestic and international factors. Internal economic challenges, coupled with external pressures on commodity prices, constrain appreciation. The domestic monetary policy stance reinforces this, suggesting a limited outlook for near-term strength.