The Canadian dollar, often referred to as the loonie, demonstrated significant strength against the U.S. dollar last week. On Friday, it gained 0.5%, trading at 1.3715 per U.S. dollar or 72.91 U.S. cents. This increase follows the currency reaching its strongest intraday level since early January, touching 1.3705.
Significant Weekly Gain
For the week, the Canadian dollar’s value rose by 1.5%, marking its largest weekly gain since May. This surge comes amid a backdrop of declining U.S. dollar strength across various major currencies. Investor concerns related to escalating geopolitical tensions have primarily impacted the U.S. dollar.
Expert Insights
Aaron Hurd, a senior portfolio manager at State Street Global, noted that current currency movements could be attributed to U.S. dollar weakness rather than a resurgence of the Canadian dollar. He emphasized ongoing risks stemming from U.S. political tensions and upcoming negotiations related to the United States-Mexico-Canada Agreement (USMCA), set for review by July 1.
Economic Indicators
- Canadian retail sales increased by 1.3% in November compared to October.
- On an annual basis, retail sales rose by 3.1%.
- Preliminary December estimates suggest a 0.5% decline in retail sales.
- Manufacturing sales saw a slight increase of 0.5% in December.
Meanwhile, the price of oil, a crucial export for Canada, rose by 2.7%, reaching $60.98 per barrel. Concerns over potential supply disruptions in the Middle East have contributed to this uptick.
Canadian Bond Yields
Canadian bond yields have experienced an upward trend, with the 10-year yield increasing by 2.9 basis points to 3.440%. These financial indicators reflect the market’s broader sentiment over Canada’s economic outlook.
As economists predict steady economic growth with manageable inflation, the Bank of Canada is expected to maintain its overnight interest rate through 2026. This forecast is supported by a growing consensus among financial experts.
