FX.co ★ Canadian Dollar Weakens to 6-Month Low

In mid-October, the Canadian dollar slumped beyond 1.4 against the US dollar, reaching its lowest levels in six months. This decline was influenced by weaker crude oil prices, a slowdown in domestic economic data, and expectations of reduced interest rates by the Bank of Canada. Crude oil, Canada’s most significant export, has fallen to its lowest point in five months due to ongoing US-China trade tensions, an increase in supply, and projected growth in US oil inventories. These factors fuel concerns of excess supply and diminished demand, undercutting a major support for the Canadian currency. Concurrently, key economic indicators suggest a deceleration in domestic activity, with GDP growth slowing down, core inflation nearing the lower boundary of the Bank of Canada's target range, and relatively modest wage increases. These conditions weaken the argument for higher interest rates. Recent communications from the Bank of Canada hint at a possible rate cut or pause, which would further decrease the anticipated returns on Canadian assets when compared to those in the US.