Since the start of this week, the Canadian dollar has declined against the US dollar by over 1%. There are several factors behind the softness in the loonie this week. Most importantly, the Bank of Canada’s statement on Wednesday took an unexpectedly cautious tone about economic recovery and downgraded growth forecast for 2021. Second, oil is about 5% off of its recent highs. Third, a hotter-than-expected inflation figure in the US early in the week has the markets refocused on the possibility of the Fed having to respond sooner than expected and pushed up the US dollar. Finally, concerns about Covid variants hampering global recovery continue to percolate and are offsetting good corporate earnings, resulting in mixed equity performance. This morning USD to CAD is flattish at 1.258 (CAD to USD is at 0.795).
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