The Canadian dollar stabilized against its U.S. counterpart on Friday, but was on course for its third consecutive weekly decline, driven by falling oil prices and investors’ bets on an unusually large cut in interest rates of the Bank of Canada.
The loonie was trading almost unchanged at 1.38 per U.S. dollar, or 72.46 U.S. cents, after moving in a range of 1.3786 to 1.3810. For the week, the currency fell 0.3%.
“The fact that USD-CAD ends the week flirting with a break above 1.38 should come as no surprise,” said Nick Rees, senior foreign exchange analyst at Monex Europe Ltd.
“While they appear hot on the surface, recent September employment numbers were much weaker in detail, while the Consumer Price Index (CPI) from the same week was unequivocal.
Growth in Canada’s consumer price index slowed more than expected to 1.6% in September, below the Bank of Canada’s 2% target.
“Amid anemic growth, the data argues for a 50 basis point rate cut by the Bank of Canada next week. We believe it will do so as well, suggesting risks are skewed in favor of a further decline in the loonie,” said Mr. Rees.
Investors see there as being about a 90% chance that the Bank of Canada will cut its benchmark interest rate by half a percentage point in its decision on Wednesday, according to swap market data. The key rate is currently 4.25%.
It would be the fourth rate cut since June and the first reduction of more than 25 basis points in 15 years, outside of the pandemic era.
The price of oil, one of Canada’s main exports, fell 1.4% to $69.70 per barrel, as economic growth in China slowed and threats to the economy eased. supply to the Middle East.
Canadian bond yields fell across the curve, with the 10-year losing 3 basis points to 3.13%.
