Canadian dollar extends weekly losing streak on BoC rate cut

The Canadian dollar CADUSD weakened to near 12-week low against its U.S. counterpart on Friday, pressured by the Bank of Canada’s most recent interest rate cut and an uncertain outlook for the economy ahead of the Nov. 5 U.S. presidential election.
The loonie was trading 0.2 per cent lower at 1.3880 to the U.S. dollar, or 72.05 U.S. cents, after touching its weakest intraday level since Aug. 5 at 1.3893.
For the week, the currency was down 0.6 per cent, its fourth straight weekly decline, marking the longest such streak since January.
On Wednesday, the BoC reduced its benchmark rate by half a percentage point to 3.75 per cent to support the economy, the first cut of that size in 15 years outside of the pandemic era.
“We’re weaker on the week not surprisingly given the Bank of Canada’s 50-basis-point rate cut,” said Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets.
Canada’s new immigration reduction targets announced this week will likely have a bigger impact on the BoC’s growth forecast than on the inflation trajectory, Governor Tiff Macklem said.
“Part of what’s gone on is you have a U.S. election coming up and there are risks to Canada and the Canadian dollar as part of the U.S. election. Until those risks are cleared there is a meaningful headwind for Canada,” said Reitzes.
Republican U.S. presidential candidate Donald Trump has proposed sweeping tariffs on imported goods. Canada sends about 75 per cent of its exports to the United States.
Domestic data showed that retail sales rose by 0.4 per cent in August from July, slightly less than expected, while a preliminary estimate showed sales up 0.4 per cent in September.
Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up nearly 2 basis points at 3.260 per cent.