While the Canadian currency has been dragged by political developments in recent days, it has one silver lining: it stands to get a reprieve if the US dollar’s seasonal weakness rears its head again.
Finance Minister Chrystia Freeland’s abrupt resignation from Prime Minister Justin Trudeau’s cabinet is just the latest catalyst holding back the loonie. The currency has been falling for past three weeks as the Bank of Canada lowered borrowing costs and US President-elect Donald Trump’s threats of 25% tariffs cloud the economic outlook for the nation.
Yet one factor that could give it a break from losses is the greenback’s tendency to retreat in December, as it has done in eight of the last 10 instances. That could limit the loonie’s decline to around C$1.43 per dollar, according to Monex’s Helen Given. Yet the other factors weighing on the currency — particularly the BOC’s rate cut last week — remain in the spotlight.
Given notes: The Bank of Canada’s interest rate cut last week, though initially read by markets as a hawkish cut, did show growing concern over the state of the nation’s economy and anything that injects further uncertainty into the atmosphere is likely to add to those concerns.
