The Canadian dollar is expected to face a challenging period in the coming months due to its downward trend. Experts predict that uncertainty from incoming US President Donald Trump’s policy proposals will impact business investment and consumer confidence, leading to a weaker loonie in the short term.
The outperforming US economy, pushing US yields higher than Canadian yields, is also attracting more investments south of the border. Additionally, there is a widening monetary policy differential between the Bank of Canada and the US Federal Reserve, making the Canadian dollar less attractive to global investors.
The US Federal Reserve recently delivered a quarter-percentage point interest rate cut, and is now expected to slow the pace of its rate cuts next year to two from the previously estimated four cuts.
The Bank of Canada has also delivered its second consecutive outsized interest rate cut in December, bringing its key rate down to 3.25 per cent. The Canadian economy has continued to shrink on a per-capita basis, and population growth is forecasted to reverse in 2025, adding additional strains to the economies growth potential.
Source: The Star
Source: Financial Post
Source: Globe and Mail
