The Canadian dollar briefly sank to a two-and-a-half-month low against the US Dollar on Tuesday, and the USD/CAD currency pair finally pushed past 1.35 (CAD/USD 0.7407) after multiple failed attempts to do so over the past 10 days.
This most recent bout of Canadian dollar weakness against the US dollar has been driven by a general ‘risk-off’ global sentiment, spurred by a steady stream of negative economic news emerging from China. Additionally, contributing to the more pessimistic global economic outlook is the multi-decade high in the price of US Treasury bond yields. Typically, an increase in government bond yields indicates rising inflation expectations, implying that investors anticipate interest rates to ‘stay higher for longer,’ thereby increasing the likelihood of a global economic recession.
While the Canadian dollar managed to regain roughly half a cent on Wednesday morning, it appears weaker and in a more precarious position. This favors US dollar sellers, and we anticipate further weakening of the Canadian dollar against the US dollar in the next few weeks.
The Canadian dollar is currently trading at 1.3522 against the US Dollar.
