For the second day in a row, the Canadian dollar is an underperformer in the currency markets. The USD index (a broad measure of USD against major trading partners) is actually down 0.7% this morning but it is down only 0.2% against the Canadian dollar. So, while the Loonie is actually up against the US dollar, it is down against almost every other major currency. The reasons for the relative underperformance of our currency are not clear, as we discussed in yesterday’s note. Indeed, it goes against the Canadian dollar’s general correlation to oil and equities, which are both flat to up in the last couple of days. Certainly, Governor Macklem gave a bearish view of the prospects for the economy in the near future and made a veiled attempt at talking down the Canadian currency but that happened on Monday and before the underperformance started on Tuesday. While a couple of days does not make a trend, we are watching closely to try to understand the fundamental reasons for the underperformance of the Canadian dollar in the last couple of days.
