The Canadian dollar is weakening against the US dollar, influenced by softer domestic inflation data, fading terms of trade support, and expectations of potential OPEC+ output increases. Markets are adjusting their expectations for the Bank of Canada’s (BoC) rate path, diminishing the yield support for the loonie.
- The Canadian dollar weakened toward 1.367 per US dollar.
- January CPI slowed to 2.3%, and the Bank of Canada’s trimmed mean eased to 2.4%.
- Gasoline prices plunged 16.7% year-over-year.
- Markets are flattening the expected rate path for the BoC.
- Crude oil faces renewed supply headwinds as OPEC+ considers resuming output increases in April.
- USD/CAD appreciates for the sixth consecutive day and reaches the 1.3650 area.
- Soft Canada’s CPI figures strengthen the case of a BoC rate cut in July.
The currency’s value is being pressured by a combination of factors, including cooling inflation that reduces the urgency for further central bank tightening. Simultaneously, the prospect of increased oil supply could limit gains in Canada’s exports, further weighing on the currency. The market is now pricing in a less aggressive monetary policy stance from the Bank of Canada, potentially diminishing its attractiveness relative to other currencies.