FX.co ★ Canadian Dollar Weakens Toward 6-Month Lows

The Canadian dollar has dropped past the C$1.40 mark against the US dollar, nearing a six-month low. This decline comes as financial markets are factoring in an almost certain 25 basis point rate cut by the Bank of Canada. Additionally, the sudden halt of trade negotiations by Washington has heightened the risk of tariffs, potentially weakening Canadian exports. Such trade disruptions are likely to intensify tariff-related and sector-specific challenges, putting pressure on business investments and export revenues, potentially slowing growth. Consequently, the Bank of Canada might be compelled to further ease monetary policy to mitigate these impacts. In response to recent sluggish domestic economic activity and disappointing survey results, investors are now highly confident in a 25 basis point rate cut at the upcoming Bank of Canada meeting. This anticipation has lowered expected Canadian short-term interest rates, diminishing the yield differential with the United States. Concurrently, US inflation figures for September came in slightly below expectations, reinforcing predictions of potential easing by the Federal Reserve.