On Friday, USD/CAD slipped in line with the broad weakness of the US Dollar, closing the week below 1.3280 after rallying to over 1.3385 earlier in the day. However, this morning, the US dollar is recovering most of its losses due to negative economic news from China, which once again highlights the potential for weaker global demand. A decline in global demand would undoubtedly have a negative impact on Canada’s export-dependent economy.
The Canadian dollar had strengthened sharply against the US Dollar in the month of June, going from over 1.36 to about 1.31 (USD/CAD). However, so far in July, the Canadian dollar has given up about half of those gains.
There seems to be no letup in the steady stream of positive economic news rolling in this week. Higher Japanese and Australian retail sales, better-than-expected US weekly unemployment numbers, and a significant upward revision in USD Q1 GDP from 1.4% to 2% are all fanning the flames of the ‘higher for longer’ school of thought when it comes to interest rates and central banks’ strategy to fight inflation.
The Canadian dollar continued its trend of setting overnight highs against the US dollar reaching 1.3177 last night. The Canadian dollar gained strength against the US dollar due to the broad weakness of the USD. Over the weekend and into Monday, the US dollar had initially strengthened as a result of the chaotic and short-lived armed rebellion in Russia, but it relinquished most of its gains today.
