The Canadian dollar is facing headwinds, weakening against the US dollar due to a combination of factors including slowing domestic growth, falling oil prices, and a strengthening US dollar. Recent economic data indicates a softening in Canadian momentum, while external support from oil prices has diminished.
- Canadian dollar weakened past 1.36 per US dollar.
- Canadian GDP was flat in November.
- Goods producing industries contracted for the third time in four months.
- Manufacturing weakness persists.
- Expectations that the BoC can remain patient are reinforced.
- Labor market slack continues to build.
- Oil prices slid toward the low $60s per barrel.
- US dollar is firmer following Kevin Warsh’s nomination as Federal Reserve chair.
- USD/CAD holds above 1.3625.
The Canadian dollar’s value is being suppressed by both internal and external forces. Domestically, a stagnant economy and weak manufacturing sector are reducing the likelihood of interest rate hikes, while globally, declining oil prices and a stronger US dollar are further diminishing its appeal. This combination of factors suggests continued downward pressure on the Canadian currency in the short term.