The Canadian dollar has been quietly gathering momentum—and on Friday, it launched to a seven-month high against the US dollar. While it has since pulled back slightly, the Loonie’s upward trajectory remains firmly intact, propelled by a mix of resilient domestic data and global market dynamics.
The initial boost came from March’s retail sales report, which showed a 0.8% increase—topping expectations. The data highlighted the surprising strength of Canadian consumer demand, a key signal of economic health at a time when global growth concerns linger.
At the same time, domestic inflation figures revealed an interesting split: while headline inflation is easing, the Bank of Canada’s core inflation measures are still rising. This has left rate expectations in flux. Currency markets are currently pricing in a 32% chance of a rate cut in June, but with inflation proving sticky and consumers still spending, there’s growing speculation the BoC may hold off.
These domestic tailwinds have helped lift the Canadian dollar, but global factors are also playing a role. Late last week, US President Donald Trump reignited fears of a trade war with the EU—only to step back days later, extending the tariff deadline to July. The reversal eased immediate market anxiety and helped support risk-sensitive currencies like the CAD.
Meanwhile, the US dollar is losing altitude. The Dollar Index (DXY) hit a four-week low on Monday amid ongoing fiscal concerns and a cautious Fed outlook. Even though it has since stabilized, it remains under pressure, giving the Canadian dollar more room to climb.
With the US and UK markets closed Monday, trading remains thin. But eyes are already turning to the Fed’s meeting minutes on Wednesday and Canada’s GDP numbers due Friday—two key events that could provide the next jolt of energy.
For now, the Canadian dollar isn’t just gaining—it’s climbing steadily, powered by solid fundamentals and global uncertainty. Whether this rally has more fuel will depend on what comes next.
The Canadian dollar is currently trading at 1.3729 CAD against the US Dollar.
