FX.co ★ Canadian Dollar Weakens to Early-June Lows

The Canadian dollar recently fell past 1.37 against the US dollar, marking its weakest point since early June, primarily due to a broad-based resurgence of the US dollar. This strengthening of the American currency has been driven by stronger-than-expected US retail sales, lower-than-anticipated weekly jobless claims, and a growing consensus that the Federal Reserve will maintain interest rates at their current levels for a longer period. These factors have placed significant pressure on the Canadian dollar. Additionally, exporters are facing uncertainty due to the potential imposition of a 35% tariff on Canadian exports not covered under the USMCA, which could come into effect after August 1st. This has further diminished the demand for the Canadian dollar in terms of forward-covering. Concurrently, Canada's trimmed-mean core Consumer Price Index (CPI), regarded as the Bank of Canada's preferred measure of underlying inflation, held steady at 3% in June. This stability supports the expectation that policymakers will maintain the overnight rate at 2.75% rather than moving prematurely towards rate cuts.