News Stream – CAD

The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Tuesday as a downturn in investor sentiment offset preliminary domestic data for August showing gains for wholesale trade and factory sales. "The Canadian dollar was not going to be able to swim against the tide of a stronger U.S. dollar for very long," said Michael Goshko, senior market analyst at Convera Canada ULC. Wall Street's main indexes fell and the U.S. dollar added to recent gains against a basket of major currencies as investors continued to grapple with the prospect of a prolonged period of restrictive monetary policy by the Federal Reserve.

The British Pound (GBP) concluded last week on a downbeat note due to a significant contraction in the U.K.'s service sector, which accounts for over 70% of the country's GDP, according to recent surveys. The downturn has heightened recession fears and led to speculations that the Bank of England (BoE) may have ended its cycle of interest rate increases.

The Canadian dollar rose against its U.S. counterpart on Monday and the 10-year yield moved above 4% for the first time in nearly 16 years, as investors bet that the Federal Reserve and the Bank of Canada would stick with their hawkish stances. Among G10 currencies, only the Swedish crown performed better than the Canadian currency, as the U.S. dollar extended its recent gains against a basket of major currencies. "The Fed and the Bank of Canada are presently the most hawkish central banks in the G10," said Tony Valente, senior FX dealer at AscendantFX.

The Canadian dollar edged lower against its U.S. counterpart on Friday but held on to a weekly gain, as higher oil prices and the prospect of additional Bank of Canada interest rate hikes offset preliminary data showing that retail sales fell in August. "Stronger-than-expected Canadian inflation data helped lift the CAD this week," said Shaun Osborne, chief currency strategist at Scotiabank. "The inflation data boosts the risk of forcing the Bank of Canada to tighten its policy rate again."

The Canadian dollar edged lower against its U.S. counterpart on Friday but held on to a weekly gain, as higher oil prices and the prospect of additional Bank of Canada interest rate hikes offset preliminary data showing that retail sales fell in August. For the week, the currency was up 0.2%, its second straight week of gains. "Stronger-than-expected Canadian inflation data helped lift the CAD this week," said Shaun Osborne, chief currency strategist at Scotiabank.

The Bank of Canada's increased interest rates appear to be tightening household budgets, leading to a decline in consumer spending. Preliminary data from Statistics Canada showed a 0.3% decrease in retail receipts for August, marking the first drop since March. This downturn follows a less-than-expected 0.3% rise in July, falling short of the anticipated 0.4% increase.

The Canadian dollar weakened against its U.S. counterpart on Thursday but was holding up better than some other G10 currencies as the Federal Reserve's hawkish stance continued to spook investors. "The loonie has been tossed around by global developments," said Jay Zhao-Murray, a market analyst at Monex Canada Inc. "We saw a really strong (U.S.) dollar buying pressure just starting after the Fed decision and I think that momentum has spilled over into this morning."

The Bank of Canada (BoC) has decided to keep its key interest rate steady at 5%, despite signs of a weakening economy, according to a summary of the governing council's discussions released on Wednesday. The decision was made earlier this month, emphasizing the bank's commitment to monitor incoming economic data and assess whether rates need to rise further.

The Canadian dollar was little changed against its U.S. counterpart on Wednesday, with the currency giving back its earlier gains as oil prices fell and the U.S. Federal Reserve added to its hawkish stance. The Fed held interest rates steady but projected another rate increase by the end of the year and monetary policy kept significantly tighter through 2024 than previously expected. "The U.S. dollar is climbing against its major rivals as Treasury yields push higher across the front-end of the curve, and risk-sensitive assets - from equities to the Canadian dollar - are weakening," Karl Schamotta, chief market strategist at Corpay, said in a note.

The Canadian dollar strengthened to a six-week high against its U.S. counterpart on Tuesday, before giving back some of its gains, as hotter-than-expected inflation data bolstered bets for additional tightening by the Bank of Canada. The Canadian dollar was trading 0.3% higher at 1.3440 to the greenback, or 74.40 U.S. cents, after touching its strongest intraday level since Aug. 10 at 1.3383. Canada's annual inflation rate in August jumped to 4.0% from 3.3% in July on higher gasoline prices.