What’s going on here?
The Canadian dollar fell to its lowest level against the US dollar in two years, slipping to 1.3945 USD, as Trump’s policies boost the greenback.
What does this mean?
The Canadian dollar’s drop highlights the challenges it faces amid anticipated inflationary US policies under President-elect Trump. The US dollar index reached a six-month high, largely due to expected import tariffs raising inflation forecasts. While Canada’s energy sector remains hopeful that vital oil exports will avoid US protectionism, the growing interest rate gap between Canadian and US bonds is adding pressure on the loonie. The Canadian 10-year bond yield has risen, with the spread reaching its largest difference since 1995 at 116 basis points. Despite its dip, the loonie has fared better than other G10 currencies due to the broadly strengthened US currency.
Why should I care?
For markets: Widening gaps and currency traps.
As the US dollar…
