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Canadian Dollar Shows Late-Week Strength, Remains Lower Overall

By May 24, 2024No Comments

Despite a strong rebound on Friday, the Canadian dollar was lower against most major currencies for the week. The USD/CAD pair traded as high as 1.3745 early in the week before pulling back to the mid-1.36 range on Friday. The Canadian dollar’s strength came despite the release of weaker-than-expected retail sales numbers in Canada.

According to Statistics Canada, Canadian retail sales fell by -0.2%, and retail sales excluding automobiles tumbled to a nine-month low of -0.6% month over month, widely missing market expectations of a 0.1% increase. Analysts attribute the strengthening of the Canadian dollar on Friday to a shift in market sentiment away from the risk aversion caused by the release of the Federal Reserve minutes, which indicated that interest rates would remain at their current restrictive levels for the foreseeable future.

Given the weaker Canadian retail sales numbers and four consecutive months of lower-than-expected inflation data, most economists are now calling for a rate cut in June by the Bank of Canada (BoC). If the BoC cuts rates at its June 5th meeting, you can expect the Canadian dollar to take a hit and possibly test the 1.38 range. However, we don’t expect the USD/CAD exchange rate to stay in the 1.38 range for long and would expect it to slowly drift back to the high 1.36 range.

The Canadian dollar is currently trading at 1.3652 CAD against the US Dollar.



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