The Canadian dollar has recently experienced a weakening trend against the US dollar, relinquishing gains achieved in January. This reversal is attributed to a combination of factors, including disappointing domestic economic data and a resurgence in US dollar strength. While services are providing some support, underlying economic momentum in Canada appears fragile, particularly within goods-producing industries. This environment reinforces the expectation that the Bank of Canada will maintain a cautious stance on monetary policy.
- The Canadian dollar has eased back toward 1.355 per US dollar.
- Real GDP was flat in November, with a third contraction in four months across goods-producing industries.
- Manufacturing is experiencing a deepening slump.
- The Bank of Canada is expected to remain cautious.
- USD/CAD found resistance at 1.3675.
- The US Dollar rallied nearly 1% against the Canadian Dollar.
The information suggests a period of uncertainty for the Canadian dollar. Economic headwinds and cautious monetary policy are likely to keep downward pressure on the currency. Furthermore, external factors, such as the strength of the US dollar driven by political and trade developments, can exacerbate this pressure. Traders should monitor upcoming economic data releases and central bank communications closely for indications of future direction.