Something that has been rare over the last few months is going on this morning. While the US dollar is drifting lower against most other major currencies, it is actually up 0.4% against the Canadian dollar. While the Loonie continues to trade at near 2 1/2 year highs, it is still interesting to note the divergence given the usually tight correlation between global developments and the exchange rate in the last few months. It is not clear why the Loonie is underperforming today. Governor Macklem of the Bank of Canada did note the appreciation of the Canadian dollar as an issue for competitiveness in his speech yesterday and made it clear that it was on the Bank of Canada’s radar. But that was yesterday and it would not explain the Loonie’s underperformance this morning. November’s inflation rate came in at 1.3% (excluding gasoline) and was above consensus estimates. November US retail sales also came in this morning and they were well below estimates, continuing a trend of recent negative economic news of the US corresponding with the country’s second wave. Oil and stocks are flattish this morning so they are not likely the cause of the move either. Regardless, the Canadian dollar is the weakest major currency this morning and we will be watching closely to see whether that stays the case throughout the day.
