The Canadian dollar has weakened against the US dollar, giving up some of its recent gains. This decline is attributed to softer domestic inflation data, a less supportive interest rate environment compared to other countries, and potential headwinds for crude oil prices, a key Canadian export.
- The Canadian dollar weakened toward 1.367 per US dollar.
- January CPI slowed to 2.3%.
- The Bank of Canada’s trimmed mean eased to 2.4%.
- Markets are flattening the expected rate path, narrowing Canada’s yield support relative to peers.
- Crude oil faces renewed supply headwinds.
- USD/CAD pair clings to Wednesday’s gains near 1.3700.
- The US Dollar trades broadly firm.
These factors suggest a less favorable outlook for the Canadian dollar in the near term. Moderating inflation reduces the likelihood of further interest rate hikes by the Bank of Canada, diminishing its attractiveness relative to other currencies. Simultaneously, concerns about oil supply potentially impact Canada’s export revenue, adding further downward pressure on the loonie. The firmness of the US dollar is also contributing to the weakening of the Canadian dollar.