The Canadian dollar has weakened against the US dollar, retreating from recent highs. Domestic inflation has softened, and the terms of trade advantage for Canada have diminished. Oil price fluctuations and changing market expectations for interest rates are contributing to this downward pressure.
- Canadian dollar weakened toward 1.367 per US dollar.
- January CPI slowed to 2.3%, trimmed mean eased to 2.4%.
- Gasoline plunging 16.7% year over year, shelter inflation cooling.
- Bank of Canada signaling policy rate settings are broadly appropriate.
- Markets are flattening the expected rate path.
- Crude oil faces renewed supply headwinds.
- USD/CAD edges higher to near 1.3700 amid rising oil prices.
- The USD/CAD pair trades in negative territory near 1.3695.
- Traders await the Canadian Retail Sales data, along with the advance US Q4 Gross Domestic Product report and the US Personal Consumption Expenditures Price Index data.
- Canadian Dollar strengthens against the Greenback amid higher crude oil prices.
The data suggest a confluence of factors are weighing on the Canadian dollar. Moderating inflation has reduced the urgency for further interest rate hikes, diminishing its yield appeal relative to other currencies. Concerns about global oil supply are limiting potential gains from Canada’s key export, impacting its trade balance. These combined influences create a less supportive environment for the currency’s value.