The Canadian dollar faced downward pressure due to a combination of factors including renewed trade friction with the US, softening domestic inflation, and a resilient US dollar. Initially buoyed by a court ruling, the loonie’s gains were quickly erased by new trade barriers imposed by the US. This, coupled with cooling inflation data and hawkish signals from the Federal Reserve, contributed to the Canadian dollar’s weakness.
- The Canadian dollar weakened toward 1.37 per US dollar.
- New US trade barriers imposed a major headwind for Canada’s export-heavy economy.
- Canadian inflation cooled to 2.3%, raising bets that the Bank of Canada may soon abandon its 2.25% pause.
- A resilient US dollar, supported by hawkish signals from incoming Fed leadership and US core PCE holding at 3%, further pressured the Canadian dollar.
- Improved Oil prices provided some support to the Canadian dollar, helping USD/CAD depreciate.
- USD/CAD slips to near 1.3650.
The combined effect of international trade dynamics, domestic economic data, and central bank policies has created a challenging environment for the Canadian dollar. The currency’s performance is being weighed down by external pressures and uncertainty surrounding future monetary policy decisions. While some factors offer fleeting support, the overall outlook suggests continued vulnerability for the Canadian dollar in the near term.